Skip to content

Posts tagged ‘to top’


Tax and Planning Impact of Supreme Court’s Ruling in the Defense of Marriage Act (DOMA) Same-Sex Marriage Rights Case


On June 26, 2013, the U.S. Supreme Court ruled on a landmark case related to same-sex marriage (SSM) (United States v. Windsor).  The 5-4 decision changes the application of federal tax rules for married same-sex couples.  Generally, the ruling should enable same-sex married couples to obtain the same treatment under federal rules as has been available to heterosexual married couples.  Federal agencies are working on issuing guidance on the effect of the Windsor decision, including whether federal rules treat a couple as married based on the state of celebration (where the marriage was performed) or state of domicile (where the couple lives).  In late August, the IRS released guidance stating that for federal tax purposes, a marriage is recognized if validly entered into in a domestic or foreign jurisdiction that has the legal authority to sanction marriages.  Thus, for federal tax purposes, the IRS is following the state of celebration rule to determine if a couple is marriedThe Departments of Labor, Defense and Homeland Security have also adopted a state of celebration ruleHowever, it is important to realize that the Social Security Administration, by law, currently uses a state of domicile rule.

 Same-sex couples who have not been legally married are unaffected by this ruling until their marital status is legally changed according to domestic or foreign country law.

This discussion will provide:

  • An overview of the Supreme Court’s decision and what it may mean for you;
  • Considerations with respect to estate, retirement, income tax, and health and welfare benefits plans; and
  • Actions to consider with respect to long-term planning and tax return preparation.

Tax Implications

Federal tax treatment now available to legally married same-sex couples includes:

  • Joint filing of federal income tax returns
  • Amending of prior tax returns
  • Pre-tax basis of employer-provided health-care benefits
  • Deductible and includable alimony
  • Income tax-free transfers between spouses
  • Lifetime gift tax-free property transfers to spouses
  • Estate tax relief for surviving spouses
  • Spousal IRA contributions, rollovers, required minimum distributions

 Filing of Tax Returns

Guidance from the IRS issued in August 2013 provides that any original return, amended return, claim for refund or credit, filed on or after September 16, 2013 by a same-sex married taxpayer must use a married filing status.  So the married filing joint or married filing separately status, must be used for 2013 returns and beyond. 

Amending of Tax Returns

Consideration should be given to amending federal income tax returns and gift and estate tax returns (for years that are still open under the tax law’s statute of limitations) to change marital and filing status and other information that will alter the tax calculations and potentially result in a lower tax liability.  State tax implications also should be reviewed.  Returns may be amended to correct filing status, dependents, income, deductions, or tax credits.  Couples may want to estimate the income tax liability that would have been due in previous years if the couple had been able file a joint return.  Even basic items are impacted, such as standard deductions, child-related tax credits, and phase-outs of certain benefits, such as the education expense deduction.  Another example of a tax change is where one spouse could have had capital losses on investments in prior years that the other spouse’s gains would offset if they could have filed joint federal returns.  However, the “marriage penalty” could be applicable for some couples and the married filing joint or married filing separate filing status may result in a higher tax liability, especially high-earning couples where both spouses are working.  Each situation will need to be reviewed carefully.  The guidance from the IRS does not require the filing of amended returns for 2012 and earlier years.

Excludable Employer-Provided Fringe Benefits

Employer-provided fringe benefits for the same-sex spouse of an employee will now be excludable from gross income.  Employers should stop including this benefit in income as of September 16, 2013.  The IRS issued guidance on September 23, 2013, on how employers can claim a refund of Social Security and Medicare taxes that they and the employee paid on these benefits for prior years, as well as amounts withheld during the current tax year.

Also, now that taxes should no longer be a factor, some couples may want to re-evaluate their health insurance choices.  One spouse may now be able to move onto the other’s more generous plan, which may also be more affordable.  You should check with your employer to see if perhaps an open enrollment period was created for this purpose.

Also, even if not changing health plans, you can file an amended return to obtain a refund of taxes you paid on those benefits in previous years that are still open for amending (generally returns filed within the last three years).  We can discuss this option with you in more detail so you can see the tax effect of other changes that would occur on the amended return when you change your filing status.

 Adoption Credit

Some couples will need to consider the impact of amending past returns on the adoption tax credit and whether the change in federal filing status will have an impact on the credit.

Deductible and Includable Alimony

Married same-sex couples who later divorce should be able to take a deduction for alimony, which would be includable in the income of the recipient.  Previously married same-sex couples who are now divorced may be able to amend returns for the same reason.

Income Tax-Free Transfers of Property Between Spouses

Gain or loss should not be recognized on the transfer of property between same-sex spouses or between former spouses incident to a divorce.  It remains unclear how previous transfers and the basis of those assets will be affected.  The IRS may issue further guidance on this point.

Gift and Estate-Tax Free Transfers/Unlimited Marital Deduction

 Married same-sex couples may claim the unlimited marital deduction for federal estate and gift tax purposes, allowing a spouse to transfer an unrestricted amount of assets to his or her spouse at any time, including at the death of the transferor, free from gift and estate taxes.  The unlimited marital deduction is considered an estate preservation tool because assets can be distributed to a surviving spouse without incurring estate or gift tax liabilities.  Some couples that set up trusts to avoid double taxation on assets being passed along to their partners may find that a trust is no longer necessary now that assets can be passed directly to a spouse tax-free.  Others may want to update their trusts to give their spouses tax-free access to the trust’s income or principal, an option this is now available to married same-sex couples.

 In addition, married same-sex couples can now elect to split gifts in order to take advantage of doubled annual gift tax exclusion ($14,000 for 2013, for a total tax-free gift of $28,000).  Married same-sex couples may also share assets without being subject to gift taxes.  For example, prior to the ruling, couples that owned a house together but did not equally split mortgage payments and other expenses may have had those expenses covered by one spouse be subject to gift taxes if they exceeded $14,000 annually.  Now that same-sex marriages are recognized for federal tax purposes, some married same-sex couples may feel more comfortable adding their spouse’s name to the property title, knowing that they have more flexibility on how they choose to split those expenses and with no gift tax implications.

 Portability of Unused Estate Tax Exemption Amount

 The American Taxpayer Relief Act of 2012 extended permanently the concept of portability, which generally allows the estate of a surviving spouse to utilize the unused portion of the estate tax applicable exclusion amount ($5.1 million in 2012, and $5.25 million in 2013) of his or her last predeceased spouse.  Now, the surviving spouse of a married same-sex couple can take advantage of portability of the unused estate tax exemption amount of his or her deceased spouse.

Related Party Rules

Same-sex married couples who are now considered married for federal income and gift and estate purposes are subject to related party rules.  This could impact the tax consequences of transactions between same-sex spouses.  Prior to this ruling, married same-sex couples were treated for tax purposes as not related for certain transactions such as selling property between them and recognizing a loss.  After this ruling, recognition of this same loss would not be allowed under the related party rules.

Spousal IRA Contributions, Rollovers, and Required Minimum Distribution

Married same-sex couples now have many more retirement plan options and issues to consider, including spousal IRAs, contributions, beneficiary designations, rollovers, and required minimum distribution (RMD) rules.  Married same-sex couples with the only beneficiary a spouse who is more than 10 years younger can now use the joint table rather than the “uniform table” for distributions.  A surviving spouse can now consider whether to make a spousal rollover of a deceased spouse’s IRA or 401(k).  The IRS has promised further guidance regarding both prospective and retroactive changes to pension plans, IRAs and retirement distributions.

Other Federal Benefits

In addition, below are some of the federal benefits or protections that may now be available to legally married same-sex couples:

  • Social Security, Medicare, and Medicaid  benefits
  • Certain veterans benefits, such as pensions and survivor’s benefits
  • Military spousal benefits
  • Family medical leave rights
  • Spousal visas for foreign national spouses
  • Private pension benefit options (e.g., survivor annuities)
  • Application of the thresholds for the tax penalties and health insurance subsidies available under the Patient Protection and Affordable Care Act

Income and Estate and Gift Tax Planning Issues

Some of the specific individual income tax and estate and gift tax planning issues that may be impacted and should be considered are:

  • Income Tax Planning Issues
    • Joint tax returns
    • Amended income tax returns
    • Estimated tax payments for 2013
    • Income tax returns beyond the statute of limitations
    • Rollover IRAs at death
    • Spousal IRA contributions and rollovers
    • IRA required minimum distributions
    • Review of the designated beneficiary on retirement and other benefits provided by an employer
    • Divorce tax issues
    • Application of the adoption tax credit
  • Estate & Gift Tax Planning
    • Updated estate plans and documents
    • Inter vivos gifts
    • Amended gift tax returns
    • Gift and estate tax returns beyond the statute of limitations
    • Portability of unused applicable lifetime exemption
    • Grantor trusts
    • Spousal rollover
    • Beneficiary designations
    • Retirement plans
    • Community property rules
    • Marital Agreements

Guidance From the Federal Government

The Supreme Court’s DOMA ruling generally means that married same-sex couples are entitled to the same federal benefits as heterosexual couples, but it does not necessarily make financial planning and tax compliance for married same-sex couples less complicated.  Also, it may take time to fully implement the Supreme Court’s decision.  Marriage is the “trigger” for more than 1,000 tax and benefit provisions in the Tax Code and other federal statutes.

Federal government agencies, including the Treasury Department and Internal Revenue Service, will continue to review and modify rules and regulations.  Employers will need to review and revise their policies and procedures regarding benefits and withholding.  Married same-sex couples will need to consider the new rules and policies, including their tax situation.  Affected couples should consider updating their estate plans based upon the estate and gift tax impact, as well as their financial plans.

There may be some state tax issues to address as well.  For example, federal employees may be entitled to certain benefits that others are not, and states likely will need to clarify what the state tax treatment is if the state does not recognize same-sex marriage.  Also, for couples living in states that do not recognize same-sex marriage, the state will likely provide guidance on how to obtain the federal tax amounts to file state income tax returns. 

It is expected that the IRS publications and website information that provide guidance to married individuals will be revised.
Back to Top


Social Security and Medicare Figures for 2014

New figures announced

The Social Security Administration (SSA) has announced that Social Security and SSI beneficiaries will receive a 1.5% cost-of-living (COLA) adjustment for 2014. According to the SSA’s announcement, after the COLA adjustment, the estimated average retirement benefit will rise from $1,275 in 2013 to $1,294 in 2014.

The Centers for Medicare & Medicaid Services (CMS) has also announced next year’s Medicare costs. The standard monthly Medicare Part B premium will be $104.90 in 2014, the same as in 2013. However, beneficiaries with higher incomes (individuals with taxable incomes of more than $85,000 and couples with taxable incomes of more than $170,000) will pay more than $104.90 per month because they must pay an income-related surcharge.

Other important Social Security and Medicare figures are listed below.

2014 Social Security figures

  • The amount of taxable earnings subject to the Social Security tax (called the maximum taxable earnings limit) will increase to $117,000 from $113,700 in 2013.
  • The annual retirement earnings test exempt amount for beneficiaries under full retirement age will increase to $15,480 from $15,120 in 2013. If a beneficiary has earnings that exceed the exempt amount, $1 in benefits will be withheld for every $2 in earnings above the exempt amount.
  • The annual retirement earnings test exempt amount that applies during the year a beneficiary reaches full retirement age will increase to $41,400 from $40,080 in 2013. If a beneficiary has earnings that exceed this amount, $1 in benefits will be withheld for every $3 in earnings above the exempt amount.
  • The amount of earnings needed to earn one Social Security credit will increase to $1,200 from $1,160 in 2013.

2014 Medicare figures

  • The Medicare Part B deductible will be $147, the same as in 2013.
  • The monthly Medicare Part A premium for those who need to buy coverage will cost up to $426, down from $441 in 2013. However, most people don’t pay a premium for Medicare Part A.
  • The Medicare Part A deductible for inpatient hospitalization will be $1,216, up from $1,184 in 2013. Beneficiaries will pay an additional daily co-insurance amount of $304 for days 61 through 90, up from $296 in 2013, and $608 for stays beyond 90 days, up from $592 in 2013.
  • Beneficiaries in skilled nursing facilities will pay a daily co-insurance amount of $152 for days 21 through 100 in a benefit period, up from $148 in 2013.

The foregoing is provided for information purposes only. It is not intended or designed to provide legal, accounting, tax, investment or other professional advice. Such advice requires consideration of individual circumstances. Before any action is taken based upon this information, it is essential that competent, individual, professional advice be obtained. JAS Financial Services, LLC is not responsible for any modifications made to this material, or for the accuracy of information provided by other sources.

Back to Top


IRA and Retirement Plan Limits for 2014


  The release of the 2014 limits is a reminder to make sure you maximize your 2013 contributions before December 31, 2013 in addition to starting your 2014 planning.  
   IRA contribution limits
The maximum amount you can contribute to a traditional IRA or Roth IRA in 2014 remains unchanged at $5,500 (or 100% of your earned income, if less). The maximum catch-up contribution for those age 50 or older in 2014 is $1,000, also unchanged from 2013. (You can contribute to both a traditional and Roth IRA in 2014, but your total contributions can’t exceed this annual limit.)Traditional IRA deduction limits for 2014

The income limits for determining the deductibility of traditional IRA contributions have increased for 2014 (for those covered by employer retirement plans). For example, you can fully deduct your IRA contribution if your filing status is single/head of household, and your income (“modified adjusted gross income,” or MAGI) is $60,000 or less (up from $59,000 in 2013). If you’re married and filing a joint return, you can fully deduct your IRA contribution if your MAGI is $96,000 or less (up from $95,000 in 2013). If you’re not covered by an employer plan but your spouse is, and you file a joint return, you can fully deduct your IRA contribution if your MAGI is $181,000 or less (up from $178,000 in 2013).

If your 2014 federal income tax filing status is:

Your IRA deduction is reduced if your MAGI is between:

Your deduction is eliminated if your MAGI is:

Single or head of household

$60,000 and $70,000 $70,000 or more

Married filing jointly or qualifying widow(er)*

$96,000 and $116,000 (combined) $116,000 or more (combined)

Married filing separately

$0 and $10,000 $10,000 or more

*If you’re not covered by an employer plan but your spouse is, your deduction is limited if your MAGI is $181,000 to $191,000, and eliminated if your MAGI exceeds $191,000.

Roth IRA contribution limits for 2014

The income limits for Roth IRA contributions have also increased. If your filing status is single/head of household, you can contribute the full $5,500 to a Roth IRA in 2014 if your MAGI is $114,000 or less (up from $112,000 in 2013). And if you’re married and filing a joint return, you can make a full contribution if your MAGI is $181,000 or less (up from $178,000 in 2013). (Again, contributions can’t exceed 100% of your earned income.)

If your 2014 federal income tax filing status is:

Your Roth IRA contribution is reduced if your MAGI is between:

You cannot contribute to a Roth IRA if your MAGI is:

Single or head of household

$114,000 and $129,000 $129,000 or more

Married filing jointly or qualifying widow(er)

$181,000 and $191,000 (combined) $191,000 or more (combined)

Married filing separately

$0 and $10,000 $10,000 or more

Employer retirement plans

The maximum amount you can contribute (your “elective deferrals”) to a 401(k) plan in 2014 remains unchanged at $17,500. The limit also applies to 403(b), 457(b), and SAR-SEP plans, as well as the Federal Thrift Savings Plan. If you’re age 50 or older, you can also make catch-up contributions of up to $5,500 to these plans in 2014 (unchanged from 2013). (Special catch-up limits apply to certain participants in 403(b) and 457(b) plans.)

If you participate in more than one retirement plan, your total elective deferrals can’t exceed the annual limit ($17,500 in 2014 plus any applicable catch-up contribution). Deferrals to 401(k) plans, 403(b) plans, SIMPLE plans, and SAR-SEPs are included in this limit, but deferrals to Section 457(b) plans are not. For example, if you participate in both a 403(b) plan and a 457(b) plan, you can defer the full dollar limit to each plan–a total of $35,000 in 2014 (plus any catch-up contributions).

The amount you can contribute to a SIMPLE IRA or SIMPLE 401(k) plan in 2014 is $12,000, unchanged from 2013. The catch-up limit for those age 50 or older also remains unchanged at $2,500.

Plan type:

Annual dollar limit:

Catch-up limit:

401(k), 403(b), governmental 457(b), SAR-SEP, Federal Thrift Savings Plan

$17,500 $5,500

SIMPLE plans

$12,000 $2,500

Note: Contributions can’t exceed 100% of your income.

The maximum amount that can be allocated to your account in a defined contribution plan (for example, a 401(k) plan or profit-sharing plan) in 2014 is $52,000 (up from $51,000 in 2013), plus age-50 catch-up contributions. (This includes both your contributions and your employer’s contributions. Special rules apply if your employer sponsors more than one retirement plan.)

Finally, the maximum amount of compensation that can be taken into account in determining benefits for most plans in 2014 has increased to $260,000, up from $255,000 in 2013; and the dollar threshold for determining highly compensated employees remains unchanged at $115,000.




Back to Top


College Costs 2013/2014: Increases Slow, but So Does Growth in Grant Aid

Every October, the College Board releases its Trends in College Pricing report that highlights college cost increases for the current academic year along with trends in the world of higher education. While costs can vary significantly depending on the region and individual college, the College Board publishes average cost figures, which are based on its survey of nearly 4,000 colleges across the country.

In its report, the College Board noted that even though this year’s increases in tuition and fees were the smallest in many years, the growth in student grant aid from previous years has not kept pace. As a result, many students will be facing higher costs, even in the face of smaller price increases.

To read the full Trends in College Pricing 2013 report, go to

 Following are cost highlights. Note that total cost figures include tuition and fees, room and board, books and supplies, and a sum for transportation and personal expenses. Together, these items are officially referred to as the “total cost of attendance.”

Public colleges (in-state students)
Tuition and fees increased an average of 2.9% this year to $8,893
Room-and-board costs increased an average of 3.6% this year to $9,498
Total cost of attendance for 2013/2014 is $22,826 (up from $22,261 last year)

Public colleges (out-of-state students)
Tuition and fees increased an average of 3.1% this year to $22,203
Room-and-board costs increased an average of 3.6% this year to $9,498
Total cost of attendance for 2013/2014 is $36,136 (up from $35,312 last year)

Private colleges 
Tuition and fees increased an average of 3.8% this year to $30,094
Room-and-board costs increased an average of 3.5% this year to $10,823
Total cost of attendance for 2013/2014 is $44,750 (up from $43,289 last year)

Cost trends 
In its Trends in College Pricing 2013 report, the College Board noted that college prices have been rising more rapidly than the prices of other goods and services over the last three decades and that “the increasing economic inequality in the United States over recent decades has exacerbated the difficulty in paying for college for many students, in addition to straining federal, state, and institutional budgets.”

The College Board noted that even though this year’s increases in tuition and fees were the smallest in many years, the growth in student grant aid from previous years has not kept pace. As a result, many students will be facing higher costs, even in the face of smaller price increases.


Back to Top


Last-Minute Agreement Ends Government Shutdown, Suspends Debt Ceiling

After a 16-day federal government shutdown and gridlock over whether to raise the nation’s debt ceiling, a last-minute agreement brought a temporary end to the impasse. The measure, formally known as the “Continuing Appropriations Act, 2014,” was passed by both houses of Congress and signed by President Obama shortly after midnight on October 17–the day on which the Treasury had said it would begin running out of cash to pay the nation’s bills.

What does the agreement do?
The legislation suspends the debt ceiling until February 7 and provides sufficient funding to reopen the government for the next three months (through January 15). It applies retroactively through October 1, the day on which the federal government was forced to begin furloughing roughly 800,000 employees.

To try to address longer-term issues, the agreement also establishes a congressional budget conference that would issue a report no later than December 13. That will be run by Sen. Patty Murray (D-Washington) and Rep. Paul Ryan (R-Wisconsin), who head their respective chambers’ budget committees. The across-the-board budget cuts known as the sequester, which were adopted as part of the agreement that ended the 2011 debt ceiling and were implemented earlier this year, remain in effect. The new agreement also requires income verification for people receiving subsidies under the Affordable Care Act, and if the debt ceiling is reached again in February, the Treasury will not be prohibited from using measures like those it has been using since May to cope with the current debt ceiling.

What exactly is the debt ceiling?
The debt ceiling represents a limit on the amount the Treasury is allowed to borrow to manage the national debt (the total amount currently owed by the U.S. government). An increase in the debt limit does not authorize additional government spending, which only Congress can approve; it enables the Treasury to help manage its cash flow and pay bills that have already been incurred.

 Technically, hitting the debt ceiling is not the same as defaulting on payments. In fact, the Treasury actually hit the debt ceiling in May, and has been using various accounting measures since then to temporarily extend its ability to borrow. That created greater uncertainty about whether hitting the debt ceiling on October 17 would have prevented the country from meeting its financial obligations. That was a special concern not only for recipients of Social Security and Medicare benefits but also for investors. Because Treasuries have traditionally been seen as the safest sovereign debt in the world, overseas investors hold a substantial amount of it. The uncertainty helped underscore fears not only of a default, but that some countries might increase calls for alternatives to the U.S. dollar as the global reserve currency.

How will the agreement affect financial markets?
Investors’ immediate reaction to the news was extremely positive. Word on Thursday that a deal had been reached sent the S&P 500 up 1.4% and added 206 points to the Dow Jones Industrial Average in a single day. Even if that enthusiasm fades as equities once again start to respond to other influences, it was a far cry from the reaction to the 2011 extension of the debt ceiling, which was followed by a 10.6% decline in the S&P over the week following the August 2 signing. But investors now must turn their attention once again to corporate earnings season and the question of whether the shutdown’s economic impact will affect when the Federal Reserve starts to taper its economic support.

The new agreement also helps protect the nation’s credit rating from a threatened downgrade that would have affected borrowing costs. Yields on 1-month Treasury bills, which had soared in October when several institutional investors began unloading them as the debt ceiling deadline neared, were cut in half overnight after the announcement.*

When will government agencies return to fully functional status?
The roughly 800,000 federal employees furloughed during the shutdown were instructed by the Office of Management and Budget to be ready to return to work the day after the agreement was signed. However, individual agencies may vary depending on the method each uses to notify employees, who will be entitled to receive back pay for the shutdown period.

 What was the economic impact of the shutdown?
Standard & Poor’s estimated that as of the day before the agreement, the shutdown had cost the U.S. economy $24 billion, cutting roughly 0.6% from inflation-adjusted Q4 gross domestic product.** (S&P also estimated that had there been a default, the result would have put the economy into recession.)

*Source: U.S. Treasury Resource Center ( Daily Treasury Yield Curve Rates as of 10/17/2013.
**Source: Standard & Poor’s press release, October 16, 2013.
Back to Top


Conventional wisdom does not always apply.

This is the subject in Gregory Karp’s article, “Turning conventional wisdom on its head”, in his October 6th article in The Chicago Tribune.  Following are excerpts from that article.

“Getting credit cards at a younger age can be a good thing. ‘It seems that the type of people who get credit early are better borrowers – less likely to default…’”.
“Part of the reason young borrowers become better borrowers may be that they are once bitten, twice shy.  ‘They have some minor delinquencies and they learn their lesson’”.
“The takeaway? Don’t necessarily discourage a young adult from getting a credit card.”

“You might think that sticking with your auto insurer year after year breeds good will and maybe even lower rates…according to the Consumer Federation of America…some insurers are illegally jacking up car insurance rates on people who, faced with higher rates, are less likely to shop for a better deal, a practice called price optimization.”  “…the takeaway is tried-and-true advice regardless of price optimization:  Regularly shop around your insurance coverage to make sure you’re not overpaying.”

“Those ‘use by’ and ‘sell by’ dates on food items seem like helpful guides, but they actually don’t mean much.  That’s because they are not standardized or regulated…”

Based on this article and numerous other similar articles, it may be more important than ever to exercise due diligence rather than rely on conventional wisdom. 

 Read More
Back to Top


U.S. Government Shutdown Explained

Congress failed to agree on a spending bill for the fiscal year starting October 1, 2013, resulting in the first government shutdown since 1995. According to the Congressional Research Service, this is the 18th time the federal government has shut down as a result of a failure to agree on an annual appropriations bill. Most shutdowns have lasted only a few hours or a few days. The most recent shutdown, in 1995, lasted three weeks.

What happens when the federal government shuts down?

When the government shuts down, federal agencies must generally suspend operations and furlough their employees. However, there are significant exceptions for government functions that promote national security, or protect human life and property. As a result, a shutdown doesn’t impact certain essential functions like the military, law enforcement, TSA, air traffic control, border patrol, emergency and disaster assistance, food safety, foreign embassies, prisons, and federal medical care (among others).

 A shutdown also doesn’t impact federal entitlement programs (like Social Security and Medicare) that aren’t funded by discretionary annual appropriations. Funding for these programs is considered mandatory, because the legislation creating the benefit obligates the government to make payment. So benefits under these programs continue uninterrupted, and the employees who administer those benefits are generally exempt from furlough.

Finally, some agencies are funded by multiple year appropriations. Even though these agencies don’t yet have any funds appropriated for the new fiscal year, they may still have funds remaining from prior appropriations, which they can use to continue operations until those funds run out.

So what does a government shutdown mean to you?

What you can do during the shutdown:
Receive and send mail–the post office is an independent agency unaffected by the budget process
Buy insurance through one of the new health insurance Exchanges
Receive your Social Security and Medicare benefits, or apply for new benefits
Get a passport or visa–but only until the State Department’s available funding runs out (during the 1995 shutdown, 200,000 U.S. applications for passports went unprocessed)
Conduct business with the United States Patent and Trademark Office–but only until the USPTO’s available funding runs out
Receive unemployment benefits and food stamps
Get an FHA or VA mortgage
Receive medical care at a veterans hospital
Use the federal court system–but only for about 10 days

What you can’t do during the shutdown:
Stop paying taxes–the IRS will continue to process electronically submitted tax returns, but if you’re being audited, you’ll get a temporary reprieve
Get taxpayer assistance from the IRS
Get a small business loan
Go to a national park, zoo, or museum–if you’re already overnighting in a national park, you generally have two days to leave
Get a paycheck, if you’re a federal employee–unless you’re the president, a member of Congress, or in the military; however, in the past workers were paid retroactively after a new appropriations bill was passed
If you need more information, most government agencies have posted their shutdown contingency plans on their websites.

And there’s more to come…

The shutdown is separate and distinct from another looming crisis–the debt ceiling. According to Treasury Secretary Jacob Lew, it’s anticipated that the United States will run out of funds as soon as October 17, and will default on its debts, unless Congress acts to raise the debt ceiling before then. More on that crisis to follow…

The shutdown is separate and distinct from another looming crisis–the debt ceiling. According to Treasury Secretary Jacob Lew, it’s anticipated the United States will run out of funds as soon as October 17, and will default on its debts, unless Congress acts to raise the debt ceiling before then.


Back to Top


Fees of a Fee-Only adviser are only paid by the client.

I have not understood why there has been any resistance to requiring financial planners and investment managers to be held to a fiduciary standard.  A recent article in the Wall Street Journal (WSJ) may indicate why some do not want to be held to a fiduciary standard.

The Free Dictionary by FARLEX defines a Fiduciary as: “An individual in whom another has placed the utmost trust and confidence to manage and protect property or money. The relationship wherein one person has an obligation to act for another’s benefit.”

A fiduciary relationship encompasses the idea of faith and confidence and is generally established only when the confidence given by one person is actually accepted by the other person.”

Many of us believe it is putting the client first. 

Jason Zweig’s September 20th article “ ‘Fee-Only’  Financial Advisers Who Don’t Charge Fees Alone” may show why there is resistance to a fiduciary standard for financial planners and investment managers.  They found that 24% of the 33,949 certified financial planners (CFP) they analyzed described their compensation as “fee-only”. 

The article notes that “Securities lawyers and government regulators say that an adviser who works for a brokerage firm or insurance company that charges commissions shouldn’t describe his services as ‘fee only’, even if the adviser himself doesn’t charge commissions to his clients.” Although none of the CFPs at major banks and brokerage firms, the WSJ identified 661 listed CFPs who call themselves ‘fee-only’” at some of the major banks and brokerage firms.  The problem extends beyond CFPs. 

Can you argue that if the compensation is not accurate, the advisor is not a fiduciary?

The WSJ Article


IRS provides guidance for recognition of same-sex marriages

IRS recently ruled (Rev. Rul. 2013-17) that all legal same-sex marriages will be recognized for Federal Tax purposes.  This applies to all taxes including: income, gift and estate taxes.  That would include qualified retirement plans and other employee benefits.  The determination is based on the status under the laws of the state where the marriage was established.  This is the rule even if the state of their domicile does not recognize the marriage.

 The ruling does not apply to registered domestic partnerships, civil unions or similar relationships recognized under state law that are not denominated as marriages.  Currently Illinois has authorized civil unions but does not denominate them as marriages.  Individuals that have had a civil union in Illinois are not considered married for Federal tax purposes.

The ruling was triggered by the recent decision of the Supreme Court in “United States v. Windsor”.  That case ruled that a portion of the “Defense of Marriage Act “ (DOMA) relating to the definition of “marriage’ was unconstitutional.  

Following are excerpts from the ruling:

“There are more than two hundred  Code provisions and Treasury regulations relating to the internal revenue laws that include the terms ‘spouse’, ‘marriage’ …” husband and/or wife.  “The Service concludes that gender-neutral terms in the Code that refer to marital status, such as ‘spouse’ and ‘marriage, ‘include, respectively, (1) an individual married to a person of the same sex if the couple is lawfully married under state law, and (2) such a marriage between “individuals of the same sex.”

“Given our increasingly mobile society, it is important to have a uniform rule of recognition that can be applied with certainty by the Service and taxpayers alike for all Federal tax purposes. Those overriding tax administration policy goals generally apply with equal force in the context of same-sex marriages.”

“For Federal tax purposes, the Service adopts a general rule recognizing a marriage of same-sex individuals that was validly entered into in a state whose laws authorize the marriage of two individuals of the same sex even if the married couple is domiciled in a state that does not recognize the validity of same-sex marriages.”

“Except as provided below, affected taxpayers also may rely on this revenue ruling for the purpose of filing original returns, amended returns, adjusted returns, or claims for credit or refund for any overpayment of tax resulting from these holdings, provided the applicable limitations period for filing such claim under section 6511 has not expired. If an affected taxpayer files an original return, amended return, adjusted return, or claim for credit or refund in reliance on this revenue ruling, all items required to be reported on the return or claim that are affected by the marital status of the taxpayer must be adjusted to be consistent with the marital status reported on the return or claim.”

Taxpayers may rely (subject to the conditions in the preceding paragraph regarding the applicable limitations period and consistency within the return or claim) on this revenue ruling retroactively with respect to any employee benefit plan or arrangement or any benefit provided there under only for purposes of filing original returns, amended returns, adjusted returns, or claims for credit or refund of an overpayment of tax concerning employment tax and income tax with respect to employer-provided health coverage benefits or fringe benefits that were provided by the employer and are excludable from income under sections 106, 117(d), 119, 129, or 132 based on an individual’s marital status. For purposes of the preceding sentence, if an employee made a pre-tax salary-reduction election for health coverage under a section 125 cafeteria plan sponsored by an employer and also elected to provide health coverage for a same-sex spouse on an after-tax basis under a group health plan sponsored by that employer, an affected taxpayer may treat the amounts that were paid by the employee for the coverage of the same-sex spouse on an after-tax basis as pre-tax salary reduction amounts.”

 IRS recognizes marriaged based on state of the ceremony
Back to Top