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STRATEGIC ISSUES...ONLINE
For week
of May 1, 2006, Issue #260
Featured Articles:
1.
Kids Can Earn More This Summer
2.
Tech Tip Weekly: Got the Urge to Merge (in MS
Word)?
3. Compliance
Calendar
If you would like to have further
information on any of these articles, let us
know. We would appreciate receiving your
comments and/or suggestions, anytime!
acarroll@pmcpa.com
acarroll@pmcpa.com
1.
Kids Can Earn More This Summer
Beginning this year,
your young children can earn more investment
income before the "kiddie tax" kicks in. The
kiddie tax rule applies to the investment
earnings of a child under age 14. It says
that income above a certain threshold amount
will be taxed at the parents' top marginal tax
rate. The intent is to discourage "income
shifting." This happens when parents try to
reduce taxes by transferring investments to
their young children or other family members
who are in a lower tax bracket.
For 2006, the kiddie tax
threshold increased to $1,700, up from $1,600
in 2005. That means your child under age 14
can now earn up to $850 in investment income
without paying any tax and an additional $850
that will be taxed at your child's rate.
Investment income above that level will be
taxed at your top rate.
The kiddie tax doesn't
rule out income shifting as a good tax
reduction strategy. You can save taxes
completely on the first $850 of income that is
transferred to each child under age 14, and
your child's rate will apply to the next
$850. Children aged 14 or older are not
subject to the kiddie tax. Instead, they must
file their own tax returns and pay taxes at
their own rates. So shifting earning assets
to them might still make good sense from a tax
viewpoint, depending on their income level and
yours.
Remember, though, that
giving assets to your children can have other
implications. You'll lose control over the
assets as the children get older, and there
could be gift tax implications. Check with
our office for a careful analysis if you think
this strategy might work for you.
2.
Tech Tip Weekly: Got the Urge to Merge (in MS
Word)?
To generate form
letters, labels, or envelopes, you combine the
source file with a form letter, label, or
envelope document. MS Word calls this process
merging. During the merge, names and
addresses from the source file are plugged
into the appropriate places in the form
letter, label, or envelope document. When the
merge is complete, you can either save the
form letters, labels, or envelopes in a new
file or start printing right away.
3.
Compliance Calendar
May 3
-Employers deposit
Social Security, Medicare, and withheld income
tax for April 26, 27, and 28
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Prangley Marks, LLP
Accountants & Consultants
"The Way We Figure, We Are The Only CPA Firm You Will Ever Need"
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