Monthly Archives: April 2014

Update on the impact of the 3.8% Medicare surtax

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Experimented with some returns on our tax software, here is an example of the impact of the surcharge, from forms 8959 and 8960, on the taxes due.

For a client with high W-2 income, as well as interest and dividend income, shifting $100,000 of income from dividends to W-2 income decreased the surcharge by $3,630 (the taxes remained unchanged).

In contrast, shifting $100,000 of salary to dividends increases the surcharge by $3,601 as does shifting $100,000 of salary to capital gains.

The message so far is: when there is substantial earned income, minimizing investment income is worth over 3% for the amount you move. That means that, all other factors being equal, an investment that had no interest, dividend or capital gains distributions will have a better after-tax return than one that does.

Selling your car? You may be entitled to a refund on your car warranty

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You found a buyer for your car and you have worked out all the details: purchase price, exchange of title, cancellation of your insurance, but have you thought about the warranties you may have on your car? If the car you are selling has an extended warranty, service agreement, guaranteed auto protection or tire coverage and these warranties have not been transferred to the buyer, you could be entitled to a refund for the remainder of the warranty.

Call your provider, with your VIN handy, and request a refund. Refunds are processed in about 30 days.

Planning for the inevitable – online end-of-life services

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What would happen if today were your last day? How would your survivors know how to administer your estate? Even if you have a will, would the personal representative or executor of your will know where to find your life insurance policy, estate documents, and the passwords to your accounts? There are many ways you can plan for this inevitable event and provide your survivors with the support they need to carry out your wishes.

In recent years, new websites have been created for end-of-life planning and documents storage like www.AfterSteps.com and www.principledheart.com. These websites provide a one-stop solution where you can store all your end-of-life documents, from wills and trusts to instructions for basic matters like cancelling your cellphone plan, or to lists storing all you passwords. These websites also organize your asset information and communicate relevant information to your beneficiaries at death.

Of course, whenever you store sensitive information online, you have to be able to trust that the service provider will keep your information secure. Generally, these websites provide bank-level security and encryption services, but as you well know, even the most “secure” websites can be vulnerable. You have to weigh the convenience these websites provide against the risk of having your account compromised.

If an online solution does not work for you, you can always choose a more traditional route. There are resources available, such as the “What if…” workbook that can help you formulate your plan. Alternatively, you can compile a binder with all of your instructions, passwords and estate documents and store your binder in a secure location, either in paper form or as an encrypted document (and be certain to communicate that location).

Whatever you choose, it is important to discuss with your estate planner to determine the best solution is for you. In the end, you want a choice that provides peace of mind for you and clarity for your survivors.