Taxpayer Relief Act isn’t a relief
As you are reading this, you are probably aware that the traditional Federal Income Tax filing deadline for farmer’s has been extended beyond March 1st to April 15th, for the 2012 tax year. Because of the American Taxpayer Relief Act, the Internal Revenue Service needs time to test their software and design forms.
Some positive things to note are that Section 179 expenses were retroactively rolled back for 2012 and the Federal Estate Tax Exemption was put at $5.25 million, for now anyway. Please be fully aware that this exemption amount can change at any time Congress should see fit and quite frankly, it has not kept pace with rising land values. Personally, I simply do not trust the vastly urban and money hungry group we have in Washington to understand what is going on out here in farm country, nor do I trust them to look out for your interests on this ultra important topic.
Other than that; do you see the irony in what they are calling this? American Taxpayer Relief Act? Really? I don’t know about you, but I don’t feel much in the way of relief, nor do I have any idea who Congress feels they have relieved of anything. Upon further reflection; this may be more accurate than I had originally thought. They do indeed continue to relieve many of us. Right out of our hard earned money. Maybe that is what they meant by this? This point should be fresh in your mind right now as you have either just got done or will soon be stroking a check payable to Uncle Sam.
Enough ranting from me on the subject, it may not do much good, but I sure feel better after venting. Many of you will be filing at the later date this year due the extension and the fact that you are taking advantage of the retroactive Section 179 deductions. This will also
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give you a little more time to consider a couple of things. One is maximizing the use of IRA contributions to further reduce your tax burden (it would be wise to check into a SEP and the higher amounts you can ultimately contribute) and you now have more time to explore the best vehicle in which to place these funds.
As laid out in my previous column, I have been big believer in Equity Indexed Annuities for many years. Through good and bad markets they just keep plugging away by not only laying down decent returns but even more importantly-guaranteeing your money will never lose value. Not just your principal investment mind you, but each and every penny it has earned. This is because your money is not placed directly in the market. Your earnings are tied to your choice of a Stock Market Index. The S & P 500 being the most widely recognized and utilized choice. Therefore you are not exposed to any market risk whatsoever. If the market goes up over the course of a year, the positive returns are credited to your account. When the market goes down-as your money is not exposed to the downturn- all of your Principal and past Earnings are fully protected. A down year can even be considered a good thing as your Index resets at the new low and you stand to make very good returns on the correction.
Another factor that every one of my clients finds refreshing is there are absolutely no fees whatsoever involved. 100% of your money is always working for you and not getting eaten up in the obnoxious fees associated with equities.
Dennis Foster has been helping farm families with their estate and financial Planning for over 20 years. He welcomes comments and questions and can be reached at 605-887-3451 or firstname.lastname@example.org.