Say's Law

Random observations from the second and final day of the 23rd annual USU Income Tax School ...

• Steve Radmall likes 529 plans better than Coverdell plans for saving for education.
• Coverdell plans do have one advantage in their ability to use them to pay for private elementary and secondary school tuition.  But like a lot of things, they expire after 2010.
• You can avoid paying income tax on US Savings Bond interest if you use it to pay for qualified tuition
• But you really ought to roll the savings bond proceeds into a 529 plan first because then you can use them for a wider range of education expenses
• I started asking everybody if they had gambling winnings 3 years ago because I tired of the IRS letters asking for more money because of gambling winnings they didn't tell me about (but I have offsetting losses so it shouldn't matter -- but it does).  Now the tax authorities are telling me I should be asking if people have felony drug convictions because they won't qualify for some of the education credits if they do.  I really don't want to know some of these things ...
• There are now 10 different programs for giving tax benefits on education expense and endless permutations of the interactions between these 10.  You can't totally rely on the computer.  Some extra effort on "what if" goes a long way ...
• There is a Form W-9S that can be used to qualify credit card debt for the student loan interest deduction -- if you jump through the right hoops
• Schedule L is back this year with more choices than ever.  You can file Schedule A or L or neither.  Sometimes skipping Schedule A and paying more federal tax is good because you save more on state tax than you pay on federal tax.  Especially if AMT is looming. Good luck getting the computer to give you a straight answer on any of that, another place you have to eyeball multiple options.
• If you hire one of those "one call, that's all" personal injury attorneys, and they get you a big settlement, it might be tax-free.  Or taxable.  Or a combination.  The part that is taxable, you have to report the gross settlement, before attorneys fees are paid, as income.  Then you can possibly claim the attorney fees as a deduction on Schedule A.  After deducting 2% of income.  And good luck dodging AMT on that one.  Really, how unfair is that?
• A presenter made a case today for filing a tax return for your child's babysitting or lawn mowing business income so that they can make a contribution to a Roth IRA.  Wow.
• We got a good laugh out of this 3 minute video ...

• Wish it weren't real
• We got 45 minutes on conversions of traditional IRAs into Roths. 
• We got 75 minutes on new tax legislation.  72 of that was on the new health care legislation.  It is actually a huge new tax law...
• Lots of info on tax court cases that settled this year
• When you have to pay a lot of tax because you didn't have enough money to pay your debts.  (So how are people going to do that?)
• How to figure basis on assets that are inherited from someone who dies in 2010.  It's different from 2009 and 2011, because of the repeal of the estate tax for this single year.
• The final speaker was the head of USU's Department of Economics and Finance.  He is a CPA who went on to get a Ph.D. in Economics.  He gives an economic outlook talk each year, but wasn't too excited to do that this year -- admitting that economists haven't been doing well at predicting where the economy is going next.  So .... we got a short explanation of Say's Law, with the admonition that we are talking about the wrong things.  His view is we won't get a long term benefit by stimulating demand, instead we should be stimulating supply, and demand will take care of itself.  Bravo!

Day 19 of the tortoise on the friendly treadmill...0.38 miles in 10 minutes @ 3% grade, burned 45 calories. Legs a little stiff, heart pumping, how does this happen in only 10 minutes?!?  Benjamin, you don't have to answer that, I can hear what you are saying from here ...  :)