Free From Income Taxes Liberty Statue                        DeTaxUS
 

                    Standing up for Financial Liberty

 














 

Home for Less Taxes

About DeTaxUS
Executive Team
Privacy Policy
Terms Of Service

Become a Member

Earn Money with our Affiliate Program

Contact Us


Members HomePage
Newsletter ArchivesMember StoreForumLinks to Valuable Tax Resources






 

 

   




 

 




 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



  

DeTaxUS Newsletter
Standing Up For Financial Liberty

Our Mission is to Abolish the Federal Income Tax

Volume 2, Issue #6
June 2002


"The issue today is the same as it has been throughout all history, whether man shall be allowed to govern himself or be ruled by a small elite."
-- Thomas Jefferson

CONTENTS:

Introduction

  1. Tax News
  2. Joke of the Month
  3. Money Saving Tips
  4. Planning for 2002
  5. Resources
  6. Editorial

INTRODUCTION

Our Mission is to Abolish the Federal Income Tax

Together we will accomplish this mission

Spring is fully sprung and everything is green and lush. Kids are getting antsy to get out of school and enjoy their freedom. But do they even know what freedom means? Or maybe they do know. It's adults who have forgotten.

Memorial Day gave us a chance to remember the patriots and soldiers who've sacrificed their time and even their lives to ensure our liberty. Let's not take for granted that liberty can endure without such sacrifice.

Let's try to recapture that youthful love of liberty, that freedom from restraint that only children enjoy so fully but seldom appreciate until it's gone.

Warmest regards,

Cory Layne
Editor



"What a curious phenomenon it is that you can get men to die for the liberty of the world who will not make the little sacrifice that is needed to free themselves from their own individual bondage."
--Bruce Barton




1.       TAX NEWS

Faster Vesting for Matching Contributions from Employers

Employees will now gain a nonforfeitable right to an employer's matching contributions to their defined contribution plan more quickly. The plan has the option of fully vesting employees after three years of service (down from five), or granting employees gradual vesting rights of 20% each year, beginning after two years of service and resulting in full vesting after six years. (The old schedule went from three to seven years.) The new vesting schedule is for employer matches in plan years starting after 2001, except for plans covered under a collective bargaining agreement. The new schedule does not apply to employee vesting in other types of contributions.


==============


Saver's Tax Credit

[Editor's Note: This credit is intended to encourage lower income workers to save more for their future retirement, but it also applies to self-employed and semi-retired taxpayers.]

The Saver's Credit is based on the first $2,000 contributed to IRAs, 401(k)s and certain other retirement plans. This credit is for single individuals with incomes up to $25,000 ($37,500 for a head of household) and married couples with incomes up to $50,000. The taxpayer must also be at least age 18, not a full-time student, and not claimed as a dependent on another person's return.

The credit is a percentage of the qualifying contribution amount, with the highest rate for taxpayers with the least income, as shown in this chart:

Credit      Married, Joint   Head of Household        Others
50%       up to $30,000         up to $22,500       up to $15,000
20%   $30,001 - 32,500   $22,501 - $24,375   $15,001 - 16,250
10%   $32,501 - 50,000   $24,376 - $37,500   $16,251 - 25,000

When figuring the Saver's Credit, taxpayers who have received distributions from their retirement plans generally must subtract these amounts from their contributions. This rule applies for distributions starting two years before the year the credit is claimed and ending with the filing deadline for that tax return.

For 2002, a taxpayer subtracts distributions received from Jan. 1, 2000, through Apr. 15, 2003, from the total 2002 retirement contributions, then multiplies the result (but not more than $2,000) by the credit rate applicable for the taxpayer's filing status and income level.

The subtraction rule does not apply to distributions which are rolled over into another plan, nor to withdrawals of excess contributions.

The Saver's Credit is in addition to whatever other tax benefits may result from the retirement contributions. For example, most workers at these income levels may deduct all or part of their contributions to a traditional IRA. Contributions to a 401(k) plan are not subject to income tax until withdrawn from the plan.


==============


IRS GIVES TAXPAYERS UNTIL OCT. 31 TO MAKE CHOICE ON NEW 5-YEAR CARRYBACK FOR NET OPERATING LOSSES

WASHINGTON - The Internal Revenue Service today allowed taxpayers until Oct. 31, 2002, to choose whether or not they want to use the new five-year carryback period for net operating losses (NOLs) that was part of a tax law enacted in March.

The new law made the extended carryback period effective for tax years ending in 2001 or 2002, but some taxpayers who filed returns before the law was passed would not have been able to use this provision.

The Congressional tax-writing committees have advised the Treasury Department that this was not their intent and that they will pursue technical corrections legislation to let taxpayers take maximum advantage of the carryback period. Today's procedures reflect that clarification.

Taxpayers that incurred an NOL but either elected to forgo any carryback period or used a two-year period when they filed may switch to the five-year period and claim a quick refund until Oct. 31, even though they would not usually have been able to do so.

Those who want their return to remain as they filed it need not do anything. Taxpayers that neither elected to forgo the carryback period nor used a two-year period may choose to relinquish the five-year period and apply a two-year period.

Revenue Procedure 2002-40 has details on what taxpayers should do in each situation. It will be on the IRS Web site at www.irs.gov soon and will be published in Internal Revenue Bulletin 2002-23, dated June 10, 2002.

The Web site also has the new IRS Publication 3991, "Highlights of the Job Creation and Worker Assistance Act of 2002," with details on other tax law changes.

Among these are a deduction for educators' expenses, additional first-year depreciation for new business property placed in service after Sept. 10, 2001, and tax incentives for the New York Liberty Zone. Pub. 3991 is also available by calling 1-800-829-3676.

Rev. Proc. 2002-33, explaining how to claim the additional depreciation and certain Liberty Zone benefits if not originally claimed on returns filed before June 1, was in Internal Revenue Bulletin 2002-20, dated May 20, and is also on the Web site.




2.       JOKE OF THE MONTH

Joe Smith started the day early, having set his alarm clock (MADE IN JAPAN) for 6 a.m.

While his coffeepot (MADE IN CHINA) was perking, he shaved with his electric razor (MADE IN HONG KONG).

He put on a dress shirt (MADE IN SRI LANKA), designer slacks (MADE IN SINGAPORE) and (ITALIAN) shoes.

After cooking his breakfast in his new electric skillet (MADE IN TAIWAN), he sat down with his calculator (MADE IN MEXICO) to see how much he could spend today.

After he set his watch (MADE IN SWITZERLAND) to the radio (MADE IN INDIA), he got in his car (MADE IN GERMANY) and continued his search for a good paying job.

At the end of yet another discouraging and fruitless day, Joe decided to relax for a while.

He put on his sandals (MADE IN BRAZIL), poured himself a glass of (FRENCH) wine, turned on his TV (MADE IN INDONESIA), and wondered why he can't find a good paying job in America.




3.       MONEY SAVING TIPS

"Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."
--Charles Dickens - David Copperfield


==============


* To make real financial progress you must reduce your liabilities and increase your assets. Pay yourself first. Invest at least 10% of your income in consumer debt repayment (over and above minimum payment due) or in some type of investment account.

* Establish specific written financial goals. Set short, medium, and long term objectives for yourself and your family. Review and update your goals regularly, at least quarterly.


==============


* Teach your kids about money and investing. If you are unsure about what they need to know, try Robert Kiyosaki's "Rich Dad, Poor Dad" book and his "CashFlow for Kids" game.

You can purchase them directly from Rich Dad at:
Rich Dad, Poor Dad

  1. Let the kids participate in planning the family budget. Show them where the money comes from and where it goes. Kids, like Uncle Sam, think their parents have endless resources. Show them your pay stub. Let them see how much goes for taxes, right off the top? How much is subtracted for savings, insurance, and other deductions. Then show them what has to be paid from what's left: this much for the mortgage, utilities, the car, college fund, food, allowances, and ... Wow! Being the family breadwinner doesn't sound like such a breeze. With young children, using a stack of play money to represent income and then portioning it out for each expense will help them understand the math.

  1. Encourage them to start a Roth IRA as soon as they start earning money. It's saving for financial independence not for retirement. The earlier a kid starts saving, the sooner s/he can achieve financial independence. A maxed-out Roth invested in a good mutual fund or an index fund could produce tax-free millions at a fairly early age. Remember the first $4,700 of earned income for a child under 18 is tax-free ($7,700 if s/he puts $3,000 of it in a regular IRA or deductible college fund.)

  1. Stay out of debt. When you buy something you can't afford to pay for, you don't own it; it owns you. Easy credit keeps the credit card companies rolling in dough while the card users work overtime to pay off all their buy now, pay later purchases. A credit card is necessary to rent a car, make purchases online and for other purposes, but it has to be used with prudence.

  1. Kids need a budget, too. Track your income (allowance, cash gifts, babysitting and lawn mowing money) and your expenses. Figure out how long it will take to save up for that mountain bike you want. Budgeting isn't hard. It can be as simple as A, B, C:
         A) Pay yourself first
         B) Pay your bills
         C) Spend no more than what's left.




"A budget tells us what we can't afford, but it doesn't keep us from buying!"
-- Anonymous




4.       PLANNING for 2002

Higher mileage allowances:
    Business mileage - 36.5-cents per mile
    Medical & moving - 13-cents per mile
    Charitable use - 14-cents per mile


==============


Interest deductions for financing a second home can be taken on a loan for a recreational vehicle or boat as long as it has self-contained cooking, sleeping and toilet facilities.


==============


Want to transfer assets to your children? You can reduce the tax bite by using valuation discounts.

Say you want to transfer your house or business. Create an LLC (or LLP) to own the asset. You can transfer title to the property into the LLC.

Make gifts to your children of units in the LLC (similar to stock in a corporation) conveying minority ownership interest to your children.

The value of the gift qualifies for two discounts.

By giving less than a majority interest, the recipient may have no voice in managing the LLC, so the gift is considered less valuable than a majority or controlling interest and qualifies for a "minority discount."

Since an interest in an LLC is not as marketable as stock in a corporation, it also qualifies for a "lack of marketability discount."

Together these discounts can reduce the value of the gift by 33%, so you can give your children up to $16,516 of assets rather than the standard limit of $11,000 in 2002.

By giving them the assets over a number of years in small increments, you can still maintain your control over the assets until you have passed the majority interest to them, at which time control will pass to them. You can still make incremental gifts, which continue to qualify for the discounts, even if the cumulative gifts have conveyed majority interest.

Should you die after transferring at least 51% but less than 100% of the asset, your estate can then claim the discounted value on the remainder since your claim on the asset is now a minority interest which lacks marketability.




5.      RESOURCES

Starting your own business and need accounting and management software?

For a free trial of Oracle's Small Business Suite with integrated website, go to: Oracle Free Trial




6.      EDITORIAL

Rather than my own editorial, I thought you'd find this parable on tax cuts more interesting.

I don't know who wrote it, but I got it from The Advocates for Self-Government: Advocates

Cory Layne
Editor

Tax Cuts Explained

Let's put tax cuts in terms everyone can understand.

Suppose that every day, ten men go out for dinner. The bill for all ten comes to $100.

If they paid their bill the way we pay our taxes, it would go something like this. The first four men -- the poorest -- would pay nothing; the fifth would pay $1; the sixth would pay $3; the seventh $7; the eighth $12; the ninth $18. The tenth man -- the richest -- would pay $59.

That's what they decided to do.

The ten men ate dinner in the restaurant every day and seemed quite happy with the arrangement -- until one day, the owner threw them a curve.

"Since you are all such good customers," he said, "I'm going to reduce the cost of your daily meal by $20."

So now dinner for the ten only cost $80.

The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still eat for free.

But what about the other six -- the paying customers? How could they divvy up the $20 windfall so that everyone would get his "fair share?"

The six men realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would end up being paid to eat their meal.

So the restaurant owner suggested that it would be fair to reduce each man's bill by roughly the same percentage, and he proceeded to work out the amounts each should pay.

And so the fifth man paid nothing, the sixth pitched in $2, the seventh paid $5, the eighth paid $9, the ninth paid $12, leaving the tenth man with a bill of $52 instead of his earlier $59.

Each of the six was better off than before. And now the first five got to eat for free.

But once outside the restaurant, the men began to compare their savings.

"I only got a dollar out of the $20," declared the sixth man. He pointed to the tenth. "But he got $7!"

"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar, too. It's unfair that he got seven times more than me!"

"That's true!" shouted the seventh man. "Why should he get $7 back when I got only $2? The wealthy get all the breaks!"

"Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor!"

The nine men surrounded the tenth and beat him up.

The next night he didn't show up for dinner, so the nine sat down and ate without him.

But when it came time to pay the bill, they discovered something important. They were $52 short!

And that, boys and girls, journalists and college instructors, is how the tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up at the table anymore.

-- Contributed by A. Nonymous




You can look up contact information for your Congressman and Senators at:
US House of Representatives
and
US Senate

P.S. Your comments and suggestions are welcome. We will try to respond to all of them personally and will include a selection of them in future newsletters and on the DeTaxUS website. Send email to: Editor

P.P.S. Let us know how you feel about the income tax. Your opinion is always welcome. You can join our online forum to discuss tax issues by going to:
DeTaxUS Forum

P.P.P.S. You can help by sharing our vision with other over-taxed Americans.


DISCLAIMERS:

The information contained herein is general in nature and is not intended as legal, accounting or tax advice by DeTaxUS, Inc. The reader should seek professional guidance prior to taking any action based upon this information. DeTaxUS, Inc. shall have no obligation to inform the reader of any changes in tax laws or other which may affect the information provided.

Portions of this newsletter may have been extracted from articles received for republication. Credit is given where the author is known. Unsigned articles and information gathered from government publications and websites are accepted as public domain.

Copyright© 2002 by DeTaxUS, Inc.
All Rights Reserved. Written permission is required to copy or republish any portion of this document.



Copyright © 2001 DeTaxUS  
Info@DeTaxUS.com - 775-673-4556
Terms of Service | Privacy Policy | Site Map