Lahti, Lahti & O'Neill, P.C. Blog

By: Stephen T. O’Neill

Retirement Planning in its most basic form involves accumulating sufficient resources via appropriate retirement vehicles and investment expertise, with the objective of providing yourself a financially secure retirement. But in its highest manifestation retirement planning involves optimizing not just the accumulation component but also the distribution component, as well as the creditor protection component, by minimizing the impact of income and estate taxes and third-party claims while maximizing perpetuation of retirement asset wealth over multiple generations.

By Michael T. Lahti

The Beanie Babies’ creator H. Ty Warner received a sentence of two years' probation and 500 hours of community service after he pleaded guilty to tax evasion. The government unsuccessfully challenged the sentence because it did not contain jail time.

Warner earned more than $24.4 million of unreported income in a Swiss bank account that resulted in a loss of $5.6 million in tax to the government. Warner applied to enter the IRS's offshore voluntary disclosure program but was rejected because he was already under investigation. He eventually pleaded guilty to tax evasion and paid $53.6 million in penalties.

By Michael T. Lahti

Lahti, Lahti & O’Neill, PC clients could benefit from a summary of Rhode Island tax changes that took effect July 1st, 2015.

• HEATING FUEL: All sales of heating fuels will be exempt from Rhode Island's 7 percent sales and use tax. (Under prior law, the exemption applied to heating fuel used in the heating of homes and residential premises, and to heating fuel used in the manufacturing process. Under the new law, the exemption will apply to heating fuel in any type of use, including any business use.)

By Michael T. Lahti

Recently the IRS data was breached, and reportedly more than 100,000 taxpayer’s information was accessed.  Senate Finance Committee Chair Orin G. Hatch recently inquired as to the breach. The text of his letter is reproduced below, as we thought it might be of interest:

By Michael T. Lahti

The Rhode Island Reinventing Medicaid Act of 2015 (the “Act”) contains legislation that could have a profound effect upon residents in Rhode Island.  The legislation appears to be hastily drafted and, frankly, contains parts that are more restrictive than federal law provides, which might lead to parts being pulled from the legislation or if passed, struck down.  In a nutshell, the legislation is attempting to turn Rhode Island into a very “unfriendly” state for seniors who need nursing home care.  Here is a quick listing of some of the key points of the legislation. 

By Michael T. Lahti

A new bill has been put forth in Congress that would modify the way a “healthy” spouse’s income from an annuity would be treated when a “sick” spouse is in a nursing home. Specifically, the proposed change would require part of the income to be available to the spouse in a nursing home (where it would need to be spent on care).

By Michael T. Lahti

President Obama and first lady Michelle Obama paid $93,362 in federal taxes on their adjusted gross income of $477,383 -- for a 19.6 percent federal tax rate -- on their 2014 income tax returns, according an April 10 White House blog post (http://goo.gl/hhLvOb).

Vice President Biden and his wife, Jill, reported an AGI of $388,844 in 2014 and paid $90,506 in federal income tax, for an effective tax rate of 23.3 percent, the White House said.

In their 2013 tax return, the Obamas reported an AGI of $481,098 and paid $98,169 in taxes, for an effective rate of 20.4 percent, while the Bidens paid $96,378 in taxes on $407,009 in AGI, for an effective rate of 23.7 percent.

The President and Mrs. Obama donated $70,712 -- about 14.8 percent of their AGI -- to 33 charities, 31 percent of which went to Fisher House Foundation, a charity for families of wounded American war veterans. The Bidens donated $7,380 -- about 2 percent of their federal AGI -- to charity in 2014, according to their Form 1040.

The Obamas also released their Illinois state tax returns, reportedly paying $22,640 in state income tax. The Bidens paid $13,661 in state income tax to Delaware, while Jill paid $3,777 in Virginia income tax, the White House said.

By Michael T. Lahti

Massachusetts Rep. David Rogers (D) and Sen. Patricia Jehlen (D) on March 10 introduced a bill to legalize and tax recreational marijuana use.  H 1561, also known as the Cannabis Regulation and Taxation Act of 2016, has 13 other cosponsors and would impose an excise tax of $10 per ounce in the first year after the legislation is approved.  The excise tax would increase every year until it reaches $50 per ounce.

By Michael Lahti

As reported in Tax Analysts (a tax news service), the Massachusetts Department of Revenue on March 16 launched a limited 60-day amnesty that covers the corporate excise and some other tax types that were not included in the first fiscal 2015 amnesty.

The DOR also issued much-anticipated guidance on the amnesty, which Gov. Charlie Baker (R) signed into law February 13, 2015.

By Michael T. Lahti

Recently I blogged about the new Achieving a Better Life Experience Act (“ABLE” Act).  This is a new law, and we are still exploring how ABLE accounts will be used. Two developments will have an impact on this; the first would be the federal government adopting regulations implementing the new law, and the second would be the states actually creating ABLE accounts. Although regulations will be forthcoming, we do not expect them anytime soon.

It will be interesting to see how this evolves, especially for people who live in states that do not enact an ABLE plan, as the ABLE Act is limited to the state where the person with a disability lives.  But, assuming that the state you live in does enact an ABLE account, we have provided some examples to identify specific issues that may arise.

By Michael T. Lahti

As part of our goal of keeping you informed of breaking news in Estate Planning and Elder Law, Lahti, Lahti & O’Neill, P.C. will be sending you occasional blogs via email.  As we hear of the changes in federal and state laws, we will send you notices of areas of law that we think you may find relevant or interesting.

Below I have provided excerpts from President Obama's fiscal 2016 budget proposal that have to do with estate and gift taxation.  Personally, I feel that considering the turbulence among lawmakers at this point, the chance of these being implemented in their presented form is extremely remote.  Nevertheless, if they were to pass, the proposals would have a profound effect on the taxes some estates would pay.  And, even if the proposals do not go anywhere, these excerpts show us what some lawmakers are thinking at this point.

Modify Estate and Gift Tax Provisions

Restore the estate, gift, and generation-skipping transfer (GST) tax parameters in effect in 2009. -- Under current law, estates, gifts, and GSTs are taxed at a maximum tax rate of 40 percent with a lifetime exclusion of $5 million, indexed for inflation after 2011. The Administration proposes to restore and permanently extend estate, gift, and GST tax parameters as they applied for calendar year 2009. Under those parameters, estates and GSTs would be taxed at a maximum tax rate of 45 percent with a life-time exclusion of $3.5 million. Gifts would be taxed at a maximum tax rate of 45 percent with a lifetime exclusion of $1 million. These parameters would be effective for the estates of decedents dying and transfers made after December 31, 2015, and would not be indexed for inflation.