Finance Tax Time

A major overhaul of US pension legislation passed the Senate last week and has been sent to the President for final approval.

The bill was approved in a 93-5 vote last Thursday in the Senate. It addresses the estimated $630 billion in underfunding in pension plans, which affects approximately 45 million American workers and retirees.

The bill is the first major change to pension law in 30 years.

The bill requires companies to fund 100% of their projected pension obligations, an increase fom the current requirement of 90%. Companies that do not meet the obligation will be prohibeted from increasing employee benefits and must make accelerated payments to catch-up.

The bill will add more information to disclosures given to workers and retirees, which give the status of their pension plan. It will also restrict golden parachute executive compensation arrangements.

The bill includes $60 billion in tax breaks that permanently extend pension and savings tax incentives that were included in the 2001 tax bill. The package includes increased contribution limits to IRAs, 401(k)s and a permanent saver’s credit for lower income workers.

Most lawmakers have welcomed the bill as an acceptable compromise.

“This bill, that passed in both the houseand the Senate, includes about 95% of the compromise language we developed in the Conference Committee,” said Senator Mike Enzi (R- Wyo.), chairman of the Senate Health, Education Labor and Pensions Committee. “It’s a package that will significantly strengthen pension funding rules, help curb record pension failures and better protect the retirement dreams of 45 million Americans.”

“Although we didn’t get everything we wanted in this bill, I am pleased the Congress will not leave this critical job unfinished as we adjourn for the August recess,” he stated. “The 45 million Americans directly affected by this bill deserve a greater sense of security about their retirements as we head ito the end of summer.”

Senate Majority Leader Bill Frist (R-Tenn.) said that the legislation will shield taxpayers from a possible multi-billion dollar taxpayer bailout of the federal Pension Benefit Guaranty Corporation, the instituation that guarantees pension benefits for workers and retirees.

“Promisess made to the American worker will be promises kept with the passage of this pension bill,” said Frist. “We have protected the interests of retirees by strengthening pensions funding rules and making permanent the retirement security provisions from the 2001 tax bill, which is a major step towards making the president’s tax cuts permanent.”

The bill, if approved by the President, will come into effect on January 1, 2008.

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1. COMPETENCE AND CREDIBILITY

It is very important that you research the credentials of
the person you have preparing your taxes. Look for
credentials such as enrolled agent or CPA, which will give
you some assurance that the preparer has had adequate
education and meets ethical standards. Also, make sure that
the tax preparer you choose can and will take the time to
research any issues they may not be familiar with. They
need to be able to call an expert, or have access to
technical resources that can help answer any questions they
may have.

In addition, use a reputable tax preparer that signs your
tax return and provides you with a copy for your records.
Also, consider whether the individual or firm will be
around to answer questions about the preparation of your
tax return, months, even years, after the return has been
filed.

2. TECHNICAL EXPERTISE AND EXPERIENCE

While most tax preparers know a little about tax laws, many
know almost nothing about technical issues. They need to
have the technical knowledge to even know where to look,
and the experience to know what to look for.

CPAs, accountants, and bookkeepers, without a tax
specialty, may not have the time, experience, education,
insight or technical skill to deal with the technical
analysis and identification of issues necessary to
effectively prevent avoidable tax overpayments.

It is important that the tax expert you choose not only has
a number of years of experience tackling technical issues,
but also a good technical knowledge base to draw from.

3. THOROUGH KNOWLEDGE OF THE LAW

In this industry, it is what you don’t know that costs you
money! There are literally volumes and volumes of laws that
can potentially affect the amount of taxes you end up
paying - and those laws change constantly. What most
taxpayers don’t realize is that even small changes can
affect your taxes in a big way. Money Magazine’s tax test
has shown that unfortunately, very few tax preparers
actually take the time to learn the hundreds of new tax
laws released every year.

This is a total disservice to the taxpayer because the
result is a representative who is unable to identify a tax
issue, tax law, or fact that could support and justify a
reduced tax liability. For this reason, the tax expert you
choose should have thorough knowledge of current laws and
stay continually educated on all new and updated tax laws
and guidelines.

4. ATTENTION TO DETAILS

Most CPAs prepare tax returns for approximately three
months out of the year and spend the balance of the time
preparing books, records and financial statements. This
makes it very difficult to keep up with the ever-changing
tax law, especially on a part-time basis. Between February
1st and April 15th, the average tax preparer completes
about 480 returns. With this overwhelming workload it is
nearly impossible for an accountant to take the time during
tax season, to thoroughly evaluate your tax situation and
find all the latest tax laws and guidelines that can be
applied, to help reduce your tax liability.

Find a tax expert that not only keeps up with current tax
laws and changes, but also is not under the same time
crunch and pressure. This way they can take the time to
closely scrutinize your tax situation and aggressively look
for every deduction that can be applied.

One of the best ways, however, to ensure that your tax
preparer is doing the best possible job for you, is to get
a qualified second opinion from a ‘tax expert” who
specializes in reviewing taxes and looking for areas where
you may be overpaying.

“The March of Tax Changes in Recent Years Has Made It
Easier to Err, and the New Tax Law Will Only Aggravate the
Problem.”(US News and World Report)

Taxes may be one of the things you can be sure of in life,
but the same can’t be said of tax laws. They change
constantly. The recent tax law changes include the most
sweeping changes in 15 years. The new legislation makes 441
tax law changes spread through 189 sections of the Internal
Revenue Code.

“In June 2001, for instance, President Bush signed into law
the Economic Growth and Tax Relief Reconciliation Act of
2001. The Act significantly alters the tax treatment of
several major financial issues, including income,
retirement savings, educational savings and estate
planning. It’s a complex law that amounts to over $1
trillion in tax cuts, but most of those cuts are being
phased in (and in some cases phased out) over a 10 year
period, and the entire act itself will end in 2010. Between
now and then, however, Congress may pass other measures
that either extend provisions in the Act or eradicate them
once the law sunsets.” (money.cnn.com/Personal Finance,
Oct. 2002)

Now, It’s More Important Than Ever To Get A Second Opinion
On Your Taxes to Ensure You Are Not Cheating Yourself and
Giving Uncle Sam a Windfall.

A second opinion will not only give you the peace of mind
that your tax preparer is doing the best possible job they
can for you, but more importantly will ensure that you are
not paying one penny more than your fair share.

The IRS has $4.8 billion dollars of taxpayers’ overpaid
taxes, sitting in a trust fund in the U.S. Treasury - but
it is not necessarily gone for good. Taxpayers can file
amended returns up to three years later, and any money
refunded is paid back with interest. (ABC News, April 12,
2002)

About The Author
Sean Schiraldi

Senior Account Executive

Taxback Recovery

Perform a Free 3 Year Tax Review now at:

http://RecoverMyTax.com

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