Common Trust Fund Questions for Beginners

Are you considering a trust fund? Trust funds are a very useful tool for saving and investing money, but a lot of people aren’t totally sure how to use a trust or even how they work. Trust funds essentially hold assets, like property, a business or money, for the benefit of another person, a group of people or even an organization. There are several common questions regarding trusts, so let’s take a look at some of them.

  • How are trust funds structured – a trust fund is a specially created entity that is held in the state where it was formed. In some states you can create perpetual trust funds, which never end, while other states only allow trusts with a termination date.
  • What are the reasons to use a trust fund – there are many reasons to set up a trust, but one of the best reasons is that they can protect your assets from creditors. Another reason to use a trust is to protect your assets from untrustworthy family members. You can use a trust to save thousands or even millions of dollars from taxes by donating the trust assets to a charity.
  • When is the right time to form a trust – this is a wide-open question because every situation is unique. It depends on your reason for setting up the trust, how much you will be putting into the trust and who will be the beneficiary. It’s best to speak with a professional to determine when the right time is for you.

If you think you are ready to create a trust then come talk with us at GROCO for more ideas and information. One of the biggest factors to consider is how your trust will affect your taxes. We will help you look at all your options and make sure that your trust is set up to be as tax-friendly as possible. Just give us a call at 1-877-CPA-2006, or click here to learn more.

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Be Careful of Scams When Donating to Charities

The world is full of good Samaritans, those people who see other people suffering, and want to help or who get involved in a good cause. Donating time, talent and money to charities and other good causes is a noble endeavor. However, as with most things in life, there are always those on the other side of the equation that are looking to take advantage of any situation, even of those who want to help the less fortunate.

Recently, the IRS warned Americans about one such catastrophic event that could lead to scammers trying to take advantage of would-be good Samaritans. South Carolina is still reeling from the horrible and widespread damage from the massive flooding the state sustained from the record-setting rain that recently blasted the area. In the midst of all the terrible destruction, many people were already reaching out to donate money for relief efforts. The bad news, scammers are out in full-force as well.

That led the IRS to issue a warning against these scammers who are standing by to take advantage of the good-hearted people who donate. The IRS says that these kinds of events often bring out many people who are looking to profit from others’ misfortune. To that end, the IRS recommends checking the IRS website to make sure that your donation is actually going to a qualified charitable organization and not into a scam artist’s pocket.

Also, remember to avoid giving out personal information, only use legitimate websites and be sure to get receipts for tax deduction purposes. Do not send or give cash and be careful of any unsolicited emails or phone calls. As always, trust your gut and use your best judgment in order to avoid being scammed.


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FATCA Is Officially Underway

We’ve been talking about it for months and according to the IRS, FATCA is now officially underway. The Foreign Account Tax Compliance Act is live and the IRS is actively exchanging information with several other countries that have signed on. So what does that mean for you and your information if you have funds in a foreign bank account? Is your information now subject to the IRS?

According to the nation’s top tax agency, at this time it is only sharing information in reciprocal exchanges that meet the agency’s strict requirements and security standards. FATCA was first passed in 2010, but most of the law didn’t take effect until this year. Any foreign institution that doesn’t comply stands to be frozen out of the all-important U.S. markets. In other words, compliance really isn’t an option.

The IRS is now offering a searchable financial institution list, as well as a downloadable tool, plus a user guide. All foreign financial institutions that have signed up with FATCA have to disclose names, addresses, account numbers and information and U.S. ID numbers. Taxpayers also need to be aware that reporting their foreign account information with FATCA is not enough. They must still file their FBARs, and a Form 8938 might also be necessary.

Make sure you don’t overlook these forms or you will wind up paying penalties: civil and possibly criminal. Sometimes the civil penalties, or the financial fines, could actually exceed the amount in your foreign account. While FATCA is really just getting started, you better not wait to get in compliance. GROCO can help you prepare for FATCA, as well as with your FBARs and your Form 8938. Click here to contact us or call us at 1-877-CPA-2006.


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Which Tax Law Is Really Hurting Silicon Valley?

Silicon Valley is known for a lot of things. Some of the world’s greatest technological advances and ideas have come from companies located in the Silicon Valley. Likewise, some of the world’s most innovative and largest companies were born in Silicon Valley and still call it home today. Many people have found great success and riches in Silicon Valley, including many employees who helped build companies from the ground up.

There is a big problem, though, for many of these kinds of employees. There is a tax provision that is really hurting people who have worked for many years for start-ups or newer companies and have helped them become successful and valuable companies. However, when it coms time for many of these employees to leave their job or simply to cash out their stock options, they can’t really afford to pay the required cash outlay.

This problem should have been fixed when companies were allowed to give employees incentive stock options. However, in 1982, Congress changed that rule when it turned exercising an incentive stock option into a tax preference as part of the AMT. That meant any gain on the exercise of incentive stock was now taxed. This is very problematic for any employee in this boat, which is having a hard time exercising his or her options. In some cases, even if they can’t sell the stock, some employees end up owing tax on phantom income but they have no money to pay for it.

This tax provision is clearly causing problem for many people who have helped make Silicon Valley what it is today. And it’s a problem that the government should fix.

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Things to Consider for Your 2015 Capital Gains Tax

There are all kinds of investors in the world. Some are looking to make a quick buck by buying and then quickly selling stocks as soon as they increase in value. Other investors buy stocks with an eye toward the future, which means they are in it for the long haul.

In any case, anyone who invests wants to be successful at it. It’s a great feeling to buy stock in a company and see that stock increase in value. However, at some point if you plan on selling that stock and cashing in or your gains, you will have to give a portion of those gains to the taxman. What percentage you will owe will depend on the size of your gain and how long you have owned the stock.

The government wants investors to hold onto their stocks longer. To encourage this they have a lower tax percentage on stocks held longer than a year. Whether you’re a quick turnaround trader or a long-term investor here’s what you should be aware of in 2015 for your capital gains taxes.

First, generally all you need to know to determine your capital gains is the difference between what you paid for the stock and how much you sold it for. When you know that amount then you can calculate the tax. Your tax rate will depend on which bracket you’re in. There are three that apply:

  • If your ordinary income puts you in the 10-15 percent tax bracket, then your long-term capital gains rate is 0 percent.
  • If your ordinary income falls in one of the 25, 28, 33, or 35 percent tax brackets then your long-term capital gains rate is 15 percent.
  • If your ordinary income is in the 39.6% tax bracket, then your long-term capital gains rate is 20%.

There are a few other caveats to remember. For high-income earners, there is an additional 3.8 percent surtax on net investment income. Also, you only pay taxes on the net of your capital gains, which can make a big difference if you sell more than one stock in a year. If you want to learn more about capital gains taxes then please contact GROCO for more answers. Click here or call us at 1-877-CPA-2006.

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What’s the Hold Up On A $5.22 Million Tax Refund?

What would you do if you filed your tax return and it showed that you were owed a refund of $5.22 million dollars? However, despite the fact that your return was legitimate the IRS still hadn’t paid up. It’s not a very common scenario, but nevertheless that is exactly what is happening to one man from Ireland who won more than $17 million while gambling in the U.S.

One of the richest men in Ireland, John P. McManus, earned $17.4 million in gambling winnings in the United States way back in 2012. He sent $5.22 million to the IRS, however, that was a mistake. Mr. McManus filed a non-resident U.S. federal income tax return describing his winnings and the amount withheld. He also explained why he should be able to get the money back because of an international tax treaty.

His return was then selected for an audit in 2014. However, the IRS approved his return a few months later. End of story, right? Not exactly. The claim was then sent to another department for further review. So what happened next? By all accounts, nothing has happened since and the IRS has failed to take any further action on the claim. Mr. McManus has decided to file a lawsuit against the U.S. to get his money back. According to his lawyer, the IRS is well aware of the law and they simply need to return his client’s money.

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Do You Know How to Stay Wealthy?

Most wealthy people work tirelessly to obtain their wealth and then continue to practice the same principles to maintain that wealth. However, achieving wealth and maintaining wealth over the long haul are two entirely different things. Therefore, it’s important to have the right advance plan in place if you wish to hold onto the wealth that you’ve worked so hard to obtain.

So what kinds of measures should you take to keep your wealth? The simple answer is that it takes some careful planning ahead. Advance planning often takes the skilled help of an experienced accounting and wealth management firm. That’s because in order to effectively hold onto your wealth you need to utilize every necessary and legal measure it takes, including tax planning and financial planning.

There are three major components to effectively protecting your wealth. They include asset protection planning, wealth enhancement and estate planning. All three of these factors are important elements to advance planning and protecting your wealth. Asset protection planning means you take the necessary steps and planning to protect your wealth from being taken. Wealth enhancement consists of effectively planning and strategizing in order to keep your taxes to a minimum, and thus keeping more of your wealth to yourself.

Finally, estate planning is using legal measures to ensure that your assets and your loved ones are taken care of after you die. At GROCO, we can assist you with all of these kinds of advance planning tactics. Click here to learn more or give us a call at 1-877-CPA-2006.

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More Proof the Wealthy Are Paying More Taxes

Depending on whom you ask, the wealthiest Americans either don’t pay enough in taxes and should be forced to pay more, or they pay way too much already and should be given a break. As with most cases, there are three sides to every story: yours, mine, and the truth.

According to the Tax Foundation, there is a lot of evidence that the wealthy are indeed already paying a lot more in taxes. According to the Tax Foundation, 2013 was a big year for tax hikes aimed at the wealthy. Not only was a new 39.6 percent tax bracket created but also the top rate on capital gains was raised to 20 percent. It didn’t stop there, either. The Affordable Care Act’s new 3.8 percent Net Investment Income Tax also went into affect.

So just how big of an impact have all these changes had on high-income earners in the country. For starters, those with yearly incomes of more than $500,000 saw their effective income tax rates soar from one year to the next. Those making between $1 and $2 million jumped from 24.2 percent to 28.6 percent from 2013 to 2014.

Meanwhile, for those who made more than $10 million experienced a jump from 19.8 percent to 26.1 percent. That equals a tax hike of more than 1.5 million. The numbers don’t lie and these numbers show that high-income earners have definitely experienced an increase in taxes recently. If you want to keep your taxes down, then contact GROCO to find out how. Click here or call us at 1-877-CPA-2006.

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How Do Profitable Traders Save on Their Taxes?

Stock trading is an up-and-down endeavor and investors can win big, lose it all or maintain an even keel. For those investors that achieve a high level of success and become profitable traders the next trick is to learn how to save on taxes. That can be a completely different game in and of itself. So what can you do to keep your tax bill down if you have been a profitable investor?

There are many strategies that successful investors employ to save on taxes, including deducting their home office expenses. Many traders work out of their home and that means they can deduct their work space, their electronic equipment and several other items. It could be as much as 10 – 20 percent of their home. This can be a very helpful deduction for investors as well as anyone who works out if their home.

Another smart move that successful traders make is to deduct their business travel, as well as their expenses for seminars and education. Many traders can also deduct their health insurance premiums. Retirement plan contributions can also be tax deductible if a trader qualifies for tax trader status. He/she also has to use an S-Corp or C-Corp management company to qualify. As for highly successful traders with a lot of income, they should consider a defined-benefit plan. These plans can allow for much larger tax-deductible contributions.

One other smart move is to save on taxes with long-term capital gains. If you hold an investment for 12 months or longer your capital gains tax rate is lower than when you sell an asset that you’ve held for less than a year. All of these steps are possible options for traders who want to cut back on their tax bill. You can contact GROCO to learn more about these and other tax-saving options. Call us at 1-877-CPA-2206

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Mansion Ends Up Getting Owner in Hot Water for Tax Evasion

Is it possible to hide anything from the IRS? Even when you think you’re safe, it appears the IRS has an eye in the sky. That eye seems to be all reaching, at least in Pennsylvania. A wealthy real estate developer and CEO of Automated Health Systems owns a luxurious 32,400 square-foot mansion that apparently caught the eye of IRS agents flying in and out of Pittsburgh.

After authorities began to ask questions that eventually lead to the mansion owner’s personal secretary ending up in some serious trouble. That’s because the secretary, who also acted as the bookkeeper for her boss, recently pleaded guilty to tax evasion, which reportedly could be as much as $250 million. The mansion owner has not been charged in the case at this point and his attorney claims that the case is nothing more than a tax dispute.

However, the attorney for the secretary claims that his client was only following her boss’ direction and simply did what he directed her to do. He did concede that it was still criminal activity and his client is aware of that. The scheme reportedly involved re-characterizing her boss’ personal expenses to appear as business expenses. Formal charges include “conspiracy to fraudulently pay for and unlawfully deduct as business expenses, millions of dollars in personal expenses of co-conspirator 1.” It would appear that “co-conspirator 1” is her boss, although he has yet to be named.

The lesson here is if you’re going to build a big mansion, make sure it’s nowhere near a major airport, or else the eye in the sky might decide to take a closer look.

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