101 Marketing Strategies for Challenging Economic Times

Click here to download the list adapted from the Guerrilla Marketing Folks.

I use it when I am stuck.  Select ten and launch them this week.

2010 Tax Outlook: "The Gathering Storm"

President Obama took office pledging to raise taxes for individuals earning more than $200,000 and families earning more than $250,000.  He also pledged to impose additional payroll tax of 2-4% for earned income above those amounts. 

Since taking office, Obama has offered a variety of cuts for lower- and middle-income Americans.  These include new credits for working individuals, expanded breaks for higher education, extended breaks for homebuyers, and even a temporary sales-tax deduction for new car purchases.  While these changes have made taxes more complicated, they've done nothing to stall future tax hikes for higher incomes. 

The recent healthcare reform act actually makes it harder to deduct healthcare costs, and imposes significant new taxes on investment income.  With the federal budget deficit approaching $2 trillion per year, many observers see the new healthcare taxes as the tip of a looming iceberg. 

This report summarizes some of the future tax hikes we can expect and offers suggestions for avoiding them where possible.  We look forward to discussing these threats and helping craft the appropriate response!  Call us at 217-241-4597.

Tax Brackets Going Up!

Tax on ordinary income is currently capped at 33% and 35% for taxpayers in the highest brackets.  On January 1, 2011, those rates rise automatically to 36% and 39.6% unless Congress votes to keep the Bush administration tax cuts. 

If you expect your 2011 income to be significantly more or less than in 2010 (as may be the case if you retire, buy or sell a business, or sell significant investments), consider timing income and deductions for maximum tax advantage.

If you expect your income to go DOWN in 2011, consider delaying income (to subject it to tax at next year's lower rate) and paying deductible expenses this year, to the extent possible.

If you expect your income to go UP in 2011, consider accelerating income from commissions, bonuses, and qualified plan withdrawals (to subject it to tax at this year's lower rate), and delaying deductible expenses until next year.

Itemized Deductions Going Down!

President Obama has proposed limiting the value of itemized deductions to just 28%, even for taxpayers in higher brackets.  This would amount to a "stealth" tax increase and cut the value of deductions for medical expenses, state and local taxes, mortgage interest, and even charitable gifts.  The administration proposes to make this change effective January 1, 2011.

Tax Strategies for Healthcare Costs

Paying for medical care becomes harder every year.  The recent healthcare reform act improves coverage and extends it to more Americans, but actually makes it harder to deduct unreimbursed expenses.  (Under current law, you can deduct medical expenses exceeding 7.5% of your Adjusted Gross Income.  Under the new law, starting in 2013, that floor rises to 10%.)  It also limits contributions to employer-sponsored flexible spending plans to $2,500/year.  

If you're free to select your own coverage, consider choosing a "high-deductible health plan"  and opening a Health Savings Account.  These arrangements bring down premium costs and use pre-tax dollars for out-of-pocket costs, bypassing the floor on AGI.  

If you're self-employed, consider establishing a Medical Expense Reimbursement Plan, or MERP.  These plans let you pay family medical expenses with pre-tax business dollars.  They may even help you avoid self-employment tax.

Audit Odds Still Low

IRS audit odds are increasing, from 1 in 200 returns for 2000 to 1 in 100 for 2008. But your chance of getting audited is still minimal. Don't take low audit rates as an invitation to cheat! But don't let fear of an audit stop you from taking every legitimate deduction you're entitled to.

New Tax on Real Estate Income

The healthcare reform act imposes an "unearned income Medicare contribution" of 3.8%, effective starting in 2013, on income from real estate investments for individuals making over $200,000 and families making over $250,000.  There are several strategies you can use to minimize taxable real estate income, including favoring tax-deductible "repairs" over depreciable "improvements" and cost segregation strategies to maximize depreciation deductions.

Higher Tax on Capital Gains

Tax on long-term capital gains (from property you hold more than 12 months) is currently capped at 15%, even if your regular tax rate is higher.  On January 1, 2011, that rate rises to 20%. The recent healthcare reform act also imposes a new "unearned income medicare contribution", beginning in 2013, of 3.8% on capital gains for individuals earning over $200,000 and families earning over $250,000.  If you have appreciated assets such as securities, real estate, or a business you'd like to sell, consider doing so before new rates become effective.  Check with us first, to discuss if you can use tax-free exchanges, installment sales, charitable trusts, or similar strategies to minimize or even eliminate tax on those sales.

Uncertainty on Estate Tax

The estate tax has actually expired, effective January 1, 2010.  However, President Obama and congressional democrats have proposed re-enacting the tax at 2009 levels (45% of net assets exceeding $3.5 million per person), retroactive to January 1, 2010.  While the healthcare reform act has pushed estate taxes off the front page, this "fix" still appears likely in 2010.

Next Steps

We're sure you appreciate this brief outline of upcoming tax threats.  While smart intelligence is crucial, intelligence alone is useless without the right action.  If the threats we've discussed so far have you worried about your financial future, you owe it to yourself to take a more comprehensive look at your taxes and finances, so that we can determine exactly which concepts and strategies will work from here. 

Any tax advice contained in the body of this presentation was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.

Dodging a bullet

From the Wall Street Journal Online:


Senate Finance Committee Chairman Max Baucus (D., Mont.) has removed a controversial proposal that would force lawyers, accountants and other professionals to pay more in payroll taxes from a broader bill to extend expired tax cuts.

The payroll tax provision, which would have raised $9 billion to help pay for tax cut extensions, had drawn strong criticism from business advocacy groups and Republicans including Sen. Olympia Snowe (R., Maine).

According to an email from Senate Finance Committee staff, it was dropped along with several other changes to the tax cut extension bill. Mr. Baucus is seeking to add the extensions to a small-business bill now pending before the Senate.


Read more about the John Edwards loop hole or is it by clicking the above link.