Do I Hear a Cry for Tax Simplification?

We have all heard a great deal of talk about simplifying the tax code. The prospect of filing your annual income tax returns on a post card must make many of you smile. Considering my position as tax advisor here at BWFA, I can only give you a forced smile on that subject. No, seriously, I work with the tax regulations all year long. The current system is difficult for many professionals to fully grasp, and there is much too much latitude for interpretation of the existing laws and regulations. As hard as this may be for you to believe, I have witnessed a shift towards a more “fair” income tax system since I began preparing taxes sixteen years ago. Underline the word “fair”. I am not suggesting that the system should not be simplified, I am simply suggesting to you that our current system of tax laws makes more sense to me than it has in the past.

One of the aspects of the new tax law, “The Taxpayers Relief Act of 1997” (I love that title), is the Roth IRA. This is an IRA into which you may make taxable contributions. If you leave those assets in the IRA for at least five years, you may begin making TAX-FREE distributions for any one of a variety of qualified purposes. Those purposes include retirement, first-time home purchase, and qualified educational expenses. Contributions may even be made to this Roth IRA after age 70 1/2. What makes this a unique planning opportunity is the ability that current IRA owners have of rolling their regular IRA’s into a Roth IRA which would make their distributions tax-free. The catch here is that the amount rolled into the Roth IRA would be immediately taxable, ratably over a four year period. We are beginning to look closely at the scenarios under which our clients might take advantage of  his new tax law.

Another service that we are now offering at BWFA is that of estimated income tax reminders and recalculation. The problems of having to remember when these payments come due, and how much to pay if there has been a change in income or expenses can be solved by paying us a quarterly fee to solve these problems for you. The service is broken down into two components:

  1. a reminder letter with the payment coupons prepared and attached and/or
  2. a recalculation of your estimated tax liability based on your up-to-the-minute income and expense information.

If you have a question about either of these services, call us.