BusinessWest

Divorce from a Taxation Perspective

1 To be classified as alimony, payments must be substantially equal and for a period of at least 10 years. Alimony is taxable to the payee and deductible by the payer. Payments related to division of assets are not deductible by payer or taxable to payee.
2 Child support is neither taxable to payee nor deductible by the payee or payer.
3 Three provisions in the law may provide relief to ‘innocent spouses’ who were unaware of a tax understatement attributable to the other spouse or to divorcing couples who lived apart from each other for at least one year.
4 An ex-spouse may be eligible for Social Security benefits if the marriage lasted at least 10 years. The beneficiary spouse must be 62 or older and unmarried in order to receive the benefits.
5 Update estate documents and beneficiaries to ensure that the ex-spouse has been removed from these documents and accounts.
6 Net operating losses (NOL) generated while married must be allocated to each spouse based on who generated the NOL. Carryovers specifically related to an asset, such as passive carry-forwards on rental property, follow the asset as allocated in the property division.
7 If the married couple used the first-time Homebuyer Tax Credit, a divorce-related transfer of the home will not trigger the recapture rule of the credit.
8 In situations where there are kids, the spouse who is entitled to the dependency exemption is able to deduct the exemption and take most tax credits related to that child.
9 In the case of joint custody, if the parent pays more than half the cost of maintaining a household and the child lives with that parent for more than half the year, that parent can claim head-of-household filing status even if that parent does not claim the child as a dependent.
10 Generally, legal fees relating to divorce are non-deductible unless they relate to tax advice or collection of taxable alimony.
Sean Wandrei is a manager in the Tax Division of Holyoke-based Meyers Brothers Kalicka, P.C., a certified public accounting firm.

1. Know what you want to learn from the conference. Most conferences have multiple tracks; try to focus on your most important goals.
2. Before the conference, identify other attendees in your breakout sessions. Learn about them and their companies via the Web and LinkedIn.
3. Set appointments in advance. Contact a few individuals who you have identified as having common interests and try to arrange to meet over coffee during the conference.
4. At the conference, focus on meeting attendees rather than the featured speakers. Attendees are likely the people who walk in your shoes and can provide you with practical ideas and support moving forward.
5. Be the first to engage other attendees at your table. Spend time asking open-ended and feel-good questions to first get to know them personally. People ultimately do business with people they know, like, and trust.
6. Always have your business card ready to exchange, and make notes about your conversations, right away, on their business cards. This will give you a frame of reference for contacting them after the conference is over.
7. Send follow-up notes and/or e-mails after the conference to continue the positive connection. Ask if they would like to continue the connection with you via LinkedIn.
8. Try to help your new colleagues. Listen for their concerns and challenges in their jobs and send them resources that you may have that can help them. Be the go-giver.
9. Be a connector. Actively listen, and try to introduce people who could provide benefit to each other. When you are a conduit who connects people in a helpful way, you are increasing your own value, and people will want to help you even more!
10. Ask your new contacts for resources and advice. People you meet at conferences can be a very valuable resource for the challenges that you face in your job. They are usually more than happy to offer best practices they have found in their work.

Brenda Olesuk is the marketing director at Meyers Brothers Kalicka, P.C. in Holyoke; (413) 536-8510.

1. Create a budget. Determine your income and expenses for each month by reviewing your checkbook, bank statements, and receipts for the last year. Don’t forget that little things add up, so track what you spend in cash for 30 days.
2. Reduce your expenses. Clip coupons, buy off-season, and avoid impulse purchases. Don’t forget that small changes add up. Saving $2 a day at the vending machine puts $500 a year back in your pocket.
3. Create an emergency fund. Whether it’s a trip to the emergency room, a car accident, or a layoff at work, having an emergency fund can save you from borrowing money when the unexpected occurs. Experts suggest setting aside three to six months of living expenses for when you need it most.
4. Pay down your debt. Paying off a credit card charging 17% annual interest is equivalent to investing money with a before-tax, guaranteed return of almost 20%. Use your cash for more worthwhile purposes than paying the credit-card company.
5. Save more. A benchmark for how much of your personal income you should save is approximately 10%; Americans are currently hovering around 5.8 percent as a personal savings amount.
6. Max out your retirement options. The earlier you start saving for retirement, the better. If your employer offers 401(k) matching, be sure to take advantage of this opportunity for free money. If you’ve already maxed out your 401(k), consider a traditional or Roth IRA. The maximum 401(k) and IRA contribution limit in 2010 is $16,500 (pre-tax). If you are more than 50 years old, the maximum contribution is $22,000.
7. Make a will. No one likes to think about dying, but a will can ensure that your assets will be divided according to your wishes.
8. Donate. Extend the season of giving all year round by contributing something from each paycheck to a charity you support.
9. Raise your tax IQ. Probably the most important, but underplanned, financial action for most people is related to taxes. Whether it is your paycheck withholding or taking advantage of the $3,000-a-year capital-loss provision, you must plan year-round for taxes. IRS.gov is a good starting point to maximize your refund.
10. Educate yourself. Financial literacy equals financial freedom. The American Institute of Certified Public Accountants’ 360 Degrees of Financial Literacy Web site (www.360financialliteracy.org) will help you make sound financial decisions in every stage of your life.

Jeffrey Soloman, CPA, CVA, is chairman of the Mass. Society of CPAS.

You generally must include taxable fringe benefits in an employee’s gross income. Most are subject to income-tax withholding and employment taxes. Here are some of these taxable items to include:
1. Personal use of auto. The value of an employee’s personal use of a company-provided auto should be included as income. There are IRS guidelines to determine the amount of this calculation.
2. Value of life insurance if over $50,000. To the extent that the benefit of the life insurance exceeds $50,000, an amount as determined by IRS tables is a taxable fringe benefit.
3. Memberships in country club dues or other social clubs. If these payments are strictly for personal use by the employee, they are a taxable fringe.
4. Tickets to entertainment or sporting events. The value of the tickets for personal use should be included as taxable to the employee.
5. Discounts on property or services. The taxable portion is the extent to which the discount exceeds the cost of the product (or more than 20% of the price for services charged to customers.)
However, some fringe benefits are not taxable (or are minimally taxable) if certain conditions are met. Some of these items are as follows:
6. Services provided to your employees at no additional cost to you.
7. Certain minimal fringes, including an occasional cab ride if an employee must work overtime, or meals that you provide at eating places that you run for your employees if the meals are not furnished at below cost.
8. Qualified transportation fringes. These are subject to special conditions and dollar limitations, including transportation in a commuter highway vehicle.
9. Qualified moving-expense reimbursements. Reimbursed and employer-paid qualified moving expenses paid under an accountable plan are not includible in an employee’s W-2.
10. Use of on-premisis athletic facilities. If substantially all of the use is by employees, their spouses, or their dependents, this is not a taxable fringe benefit.
You should contact your tax advisor to determine the value of the taxable items to include, or to determine whether or not certain items are taxable.

Cheryl Fitzgerald is a senior tax manager with the certified public accounting firm of Meyers Brothers Kalicka, P.C., in Holyoke; (413) 536-8510.

By SUE FEARN
1. Save your spare change. Avoid the extra cost of private mortgage insurance (PMI) with a down payment of 20% of the home’s purchase price.
2. Obtain a copy of your credit file. Lenders will look at your deposits and scrutinize your credit history and existing debts.
3. Don’t overuse credit cards. Too much credit-card debt will stress your ability to pay monthly debts comfortably.
4. Shop for the lowest rate between banks. Most banks will allow you to ‘buy down’ your rate by paying points. If you plan to own your home for years, save money on interest over the long term.
5. Compare lender fees. Many lenders charge a percentage of the loan as a fee, which can be very expensive; research banks that charge little to no lender fees.
6. Obtain a pre-approval. Sellers are more willing to consider an offer if they are confident that you are able to obtain the financing required to purchase their home.
7. Pay a little extra on your principal every month. This will reduce the term of your mortgage by several years and save you thousands of dollars in interest.
8. Use the equity in your home to consolidate credit-card debt, pay for education, or purchase a vehicle. The interest paid on your mortgage may be tax-deductible.
9. Read the fine print. The good-faith estimate is a standardized document that makes it easier for a consumer to compare the costs associated with obtaining a mortgage between two or more banks.
10. Already own your own home and have earned equity? Your home can be a valuable tool in helping you to realize your investment objectives. Engage the services of a reputable financial planner or investment advisor to learn more.

Sue Fearn is client sales and services manager for NUVO Bank & Trust Co.

By HYMAN G. DARLING, Esq.
1. Engage competent counsel. It is very important to ensure that the lawyer you have selected is knowledgeable in elder law. In this sub-specialty of estate planning, specially trained lawyers assist with tax, estate planning, and asset-protection planning.
2. Review tax issues. Any time there is a gift, transfer, or any transaction involving real estate, stocks, bonds, and often CDs or bank accounts, income-tax, estate-tax, and gift-tax consequences must be reviewed.
3. Purchase a pre-paid funeral. In most states, including Massachusetts, it is permissible to pre-pay a funeral or establish an irrevocable trust for burial expenses.
4. Open a burial account. Any person applying for Medicaid is also permitted to have a $1,500 burial account. This must be listed as such, and no funds may be added or withdrawn in the future.
5. Purchase a new vehicle if allowable. A reasonable amount may be spent on a car if the institutionalized person has a spouse who is not institutionalized.
6. Purchase a new home and make home improvements. If a couple is renting and have sufficient assets to purchase a house or condominium, this may be an acceptable transaction, provided that one spouse still lives at home.
7. Purchase personal items or household goods. Certain items of tangible personal property, such as new furnishings, carpeting, television, clothing, and other goods may allowable under the regulations.
8. Pay off debts. Payment of a mortgage, outstanding medical bills, credit-card bills, etc. is allowable.
9. Take a vacation. This expenditure of money on yourself is allowable.
10Review all proposed expenditures with an elder-law attorney before making any payments, decisions, or gifts. This will help prevent mistakes.

Attorney Hyman G. Darling is chairman of Bacon Wilson, P.C.’s Estate Planning and Elder Law departments, and he is recognized as the area’s preeminent estate planner. His areas of expertise include all areas of estate-planning, probate, and elder law. Darling is a past president of the Hampden County Bar Assoc., teaches elder law at Bay Path College, and is an adjunct professor at Western New England College School of Law (the LLM program), where he teaches elder law. He hosts a popular estate-planning blog at bwlaw.blogs.com/estate_planning_bits; (413) 781-0560; hdarling@baconwilson.com