Is Our Tax System Fair? edit
Wednesday, July 16, 2014 16:37

Tags: social security | tax law | Taxes

The media seems to cover income tax issues on an ongoing basis. Many advisors are not CPAs, so explaining concepts to clients can be quite challenging at times.  One of the most controversial topics centers on “regressive” vs. “progressive” tax structures.  So what do these terms mean? Understanding the definitions are important to forming an opinion about how to create a “fair” tax system.  

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The terms “regressive” and “progressive” refer to who pays relatively more tax than others.  A regressive tax causes lower-income people to pay a higher percentage of their incomes than higher-income people.  A progressive tax causes higher-income people to pay a higher percentage of their incomes than lower-income people.


For example, the sales tax is considered a regressive tax.  Why?  As a consumption tax, the tax is relatively higher for lower-income people.  Since lower-income people tend to spend more of their earnings on consumables than higher-income people, they will pay more percentage-wise.


On the other hand, the Federal income tax is progressive because the tax brackets increase as income increases.  Thus, higher-income people will pay more percentage-wise than lower-income people.


Surprisingly, Social Security is a regressive tax.  The Medicaid portion (1.45% for employees and 2.9% for self-employeds) is neither regressive nor progressive because it is imposed on all earned income.  However, the Social Security tax (6.2% for employees and 12.4% for self-employeds) is only imposed on earned income up to $117,000.  So, employees earning under $117,000 pay a total of 7.65%, but employees earning more than that pay only 1.45% on the higher earnings.


Attempting to not get into politics, I’d like to share some of my thoughts as both a CPA and financial advisor. In my opinion, low income taxpayers need a break. No matter what changes are made to our tax systems, there needs to be no tax on people earning less than poverty level. This is currently not an issue from an income tax standpoint, but it is a huge issue when talking about Social Security. As a tax person, I have seen several cases where taxpayers were disabled or unable to work in full time jobs. Rather than take social assistance (like Welfare or food stamps), these people worked in their own businesses to earn enough money to make ends meet. Unfortunately, at tax time, although no income taxes were due, they were subjected to 15.3% Social Security tax. Because there is no exemption for low income earners, this tax can cause extreme hardship.


Where should the line be drawn between encouraging success without taxing high income earners too much? I can’t say I have the answer to that. I think there needs to be a balance. And, I don’t believe that the AMT accomplishes what it was designed to do: Eliminate unreasonable advantages from tax loopholes. When the primary “loopholes” are state taxes and mortgage interest, the AMT unfairly burdens those people living in states with high income taxes and home prices. Is it fair to require Californians and New Yorkers to pay more tax?


Unfortunately, there are no easy answers. We can’t start from a “clean state” and change everything at once. That would cause economic crisis. However, we can begin to make changes that will move our tax system to one that is more “fair.” What will eventually happen is anyone’s guess!

Receive Two Continuing Education Credits For Today’s Webinar, "75 Ways To Generate Tax-Alpha (Part 1)" by Bob Keebler -- Plus Big Discounts On Bob's Tax Aides For Advisors edit
Thursday, May 29, 2014 11:14

Tags: tax efficient investing | Taxes

Bob Keebler at 4 p.m. ET today delivered the first installment of a two-part webinar program, entitled, “75 Ways To Generate Tax-Alpha.” Replaying the special 100-minute session will give you twice as much CPE as our usual one-hour sessions, and Part 2 will also be a two-credit session and Part 3. In addition, attendees at today’s webinar will receive big discounts on the following tax tools for professionals from Keebler Tax & Wealth Education:

  • The Advisor's Guide to The Top 30 Tax Planning Ideas for 2014 is 148-page guide for professionals about: bracket management, income smoothing, income shifting, reducing taxable Income, net investment income tax strategies and wealth transfer strategies. With more than 60 examples about using utilize these strategies with your clients, this is a handy reference guide for any financial advisor. While the guide costs $99 normally, A4A members attending today’s will receive a discount code for a 30% discount ($69).
  • Bob Keebler’s Roth Conversion Calculator is an Excel spreadsheet for calculating whether a client should convert. Its graphical reports allow advisors to quickly absorb results and change assumptions. Moreover, unlike other calculators, it’s not a “black box.” You’ll able to look “under-the-hood” and determine how the calculations are made. Comes with a 34-page guide to conversions, a sample client marketing letter, and a sample client memo to help you better explain Roth Conversions to clients. While the guide regularly sells for $49, A4A members attending today’s will receive a discount code 50% discount ($24.50).


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Discount Code For A4A Members For My -- A Great Resource With Tax Season Upon Us edit
Friday, March 07, 2014 14:48


With tax season in full swing and stocks showing huge returns in recent years, advisors are dealing more with tax issues related to stock options, restricted stock and other compensation methods that can be complicated tax-wise. Here’s a discount code for A4A member from, which is one of the best resources on the Web covering equity compensation and has an outstanding tax resource center.

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To receive a $25 discount on a one-year Premium Membership (offer good until April 1, 2014), enter the promotional code TAXBACK2014 in the registration/upgrade form, or click here to sign into your existing membership and then upgrade.’s Tax Center teaches the withholding, reporting, and filing rules for stock options, ESPPs, restricted stock, and SARs, which could come in especially handy during the next few weeks.


Medicare Surtax On Investment Income - Beware! edit
Tuesday, January 07, 2014 01:03

Tags: client communication | client education | high net worth | medicare surtax | new tax rules | Tax Changes | tax law | tax planning | Tax-efficient investing | Taxes

As of 2013, your clients might be impacted by the by the 3.8% Medicare Surtax. And, if they are, they might ask you, their advisor, for an explanation! It's important to know how the calculation works before you can determine if a client will be affected and whether there's anything you can do about it. 

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The surtax calculation is based on two components:
   - The taxpayer’s net investment income (‘NII’) and,
   - The taxpayer's modified adjusted gross income (‘MAGI’).  
The 3.8% applies to the lesser of NII or adjusted MAGI. 
NII is the total of all taxable investment income, including interest, dividends, capital gains from investments, rental income, passive income, annuities and royalties. It does not include retirement plan distributions. MAGI is the total of NII plus all other taxable income not included in NII, such as wages and business income. Adjusted MAGI is MAGI reduced by:
   - $250,000 for married couples filing jointly
   - $125,000 for married couples filing separately
   - $200,000 for singles and head-of-household status
Clearly, if MAGI is not greater than the threshold amounts above, no surtax will apply. Also, if NII is low, the surtax will not be material. For clients with gross income approaching or exceeding the thresholds, minimizing investment income will be important. To minimize investment income, consider:
Harvesting tax losses
Choosing high cost lots on sales
Locating income-producing investments in retirement accounts
Using municipal bonds in taxable accounts
The most critical aspect for advisors: Be aware and proactively communicate with your clients!
You Are About To Run Out Of Time To Warn Clients About The New 3.8% Surtax On Net Investment Income edit
Saturday, December 21, 2013 13:14

Tags: Tax Changes | tax law | Taxes | year end tax planning

The new 3.8% surtax on income, known as the net investment income tax (NIIT), is going sneak up on a lot of clients when it shows up for the first time ever on 2013 tax returns. You are about to run out of time to check in with clients to see if they can avert this new tax on net investment income and a bad tax surprise. That's not a lot of time, especially with the holiday this week, but it's enough time to make a phone call, ask a few questions, and possibly save a few clients a few thousand dollars.

Robert Keebler gave a webinar about the NIIT yesterday and it received a 4.7 star-rating, the kind of rave reviews from advisors that have become customary of Bob Keebler webinars. If you listen to that webinar replay, you'll probably have a very good idea of which of your clients might be "NIIT-picked" and you can give them a call and maybe save them some money.

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Only the most dedicated professionals would attend a session about the NIIT on a Friday at 4 ET less than a week before Christmas, but attendees were amply rewarded. Bob didn’t drill down into taxation the way he would when speaking to CPAs. He did something better. Keebler tailored his lesson to financial advisors.

Because the A4A audience is comprised of financial advisors and not tax-preparers, your entry point and role in advising clients on NIIT is different from a CPA’s, and Keebler’s remarks addressed what financial advisors need to know to advise clients on NIIT. Classic Keebler!

Keebler says the tax practice at accounting firms these days does not provide revenue year-round. So accounting firms are more interested in advising businesses and other services more lucrative than personal taxation. Your local CPA is typically less focused on tax practice, especially outside of the January 1 to April 15 filing season.
However, when this surtax was adopted by Congress, it was expected to raise tax revenue of $20.5 billion in 2013 and projected to generate about that amount annually for 10 years. Keebler expects it to affect about 5% of taxpayers, but a much larger number of advisor clients.
The Net Investment Income Tax is imposed by section 1411 of the Internal Revenue Code. The NIIT applies at a rate of 3.8% to certain net investment income of individuals, estates and trusts that have income above statutory thresholds.
Financial advisors can play a meaningful role in educating clients about this tax because you know about the investment side of the client’s life. So please view this webinar and get on the phone with some of your clients who might subject to the NIIT. While it is kind of late in the year to be doing this, they'll appreciate the call and that you were trying to save them money on taxes.
Here are the reviews from attendees of Bob Keebler's session on the NIIT:
·       Excellent but a lot to digest and he went a little fast over some complex issues...
·       Excellent update and presentation.
·       Mr. Keebler does a beautiful job of explaining a complex topic.
·       Well worth the time to identify problem areas that could require additional research.
·       Bob's presentation was excellent as always. He takes the IRC and makes it simple to understand and explain to clients. Thanks
·       Very precise and helpful.
·       Very excellent
·       Superb discussion of combining tax planning with financial planning.
·       If a planner has a big case, is Bob available to provide inpuit - does he do hourly? Rate? What information would be needed? Does he have a questionnaire?
·       As Andy put it so well, it was another blockbuster presentation by Bob Keebler and the focus on the 3.8% surtax (without introducing a lot of other tangential topics) was effective because it allowed everyone to try and focus on just that one issue. This is conducive to mastering the single topic of the 3.8% surtax and the use of examples was illustrative. I would suggest that similar focus be made on future Keebler webinars on a single aspect of the new law as was done today. Thank you.
·       Very Timely. Thank you
·       Bob Keebler is always very helpful w/relevant content and an easy to follow presentation.
·       Wow. This is just what I needed to help wrap the year. My focus since December 7th has been on Atlas program 33, an oil and gas partnership that offers a 94% writeoff for 2013. Thanks very much for aiding my understanding of a problem area begging for a solution right now.
·       Bob, Excellent as always. The examples were beneificial and thanks so much for the clarification about what's included and not included. Big help!!!




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