Morgan Moses Certified Public Accountants and Business Consultants

FREQUENTLY ASKED QUESTIONS

We often receive the following questions from our clients and acquaintances. Many of these answers are general in nature and omit many details and special rules and therefore should not be considered tax advice. Rather, these answers are to make you aware of various issues which should be discussed with us or another financial advisor. As new questions or issues arise we will update this page. If you have a question please contact us through the website or give us a call.

What is the status of my tax refund?
Generally, tax refunds will be received by taxpayers within three weeks for direct deposited refunds and four to six weeks if being refunded by check. You can check the status of your refund by using this web address on the Internal Revenue’s Website IRS-Individuals-Refund Status-Get Refund Status.

Should I buy or lease my next vehicle?
With all of the low or no interest financing available on new vehicles and new depreciation incentives created as a result of the September 11th terrorist attacks, the already difficult decision of whether to buy or lease a new vehicle has become even more difficult. Knowing what to do before you get to the car dealership can ease the decision making process and alleviate any unpleasant surprises later. The following are the advantages and disadvantages of buying and leasing and questions you need to answer in order to make an informed decision.

Buying
Advantages
Ownership of vehicle at the end of the loan.
Potentially, lower insurance premiums.
No mileage or excessive wear and tear limitations.

Disadvantages
Higher up front costs (down payment) and loan payments.
Buyer bears the future depreciation costs of the vehicle.

Leasing
Advantages
Lower up front costs. Many leases require small or no down payments.
Lower monthly payments.
Greater purchasing power.
Ability to change cars every few years.
Lessor bears the future depreciation cost of the vehicle.
Potential additional tax benefits.

Disadvantages
Lack of vehicle ownership if vehicle is turned in at the end of the lease. There is usually an option to buy the vehicle but many times the cost to buy is more than the vehicles worth.
Potentially higher insurance costs.
Mileage limitations.
Excessive wear and tear charges.
Early lease termination can have significant costs.
Many leases have fees due at the end of the lease.

Based upon these various advantages and disadvantages of buying versus leasing the following question should be answered:
How will this car be used?
Will this car be used for personal use, business use or both? How the vehicle is used will determine if there are tax advantages.

How long do I plan to keep this vehicle?
If you prefer to keep a car for only two or three years then normally leasing is a better option. However, if you plan to keep the vehicle longer than the lease term or as long as your loan, you should consider purchasing the vehicle.

How many miles will a put on this vehicle each year?
Most leases will limit the total number of miles you can drive during your lease term. Generally, leases will allow mileage of 10,000-15,000 miles per year. Mileage over your limit can cost you anywhere from $.07 to $.15 per mile, which can eliminate the initial savings obtained by leasing and ultimately end up costing you more.

How affordable of a car do I want?
With leasing you generally pay less up front and will have a smaller payment than if you were to buy the vehicle. This may enable you to get the car you always wanted rather then settling for a more economical vehicle.

The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.

Traditional or Roth IRA?
Before making a contribution to either type of IRA it is important to understand the differences between the two. The following advantages of both are described below in general terms. Both of these IRAs are subject to specific eligibility and distribution requirements which although not described here could affect your eligibility to make contributions or affect the tax effectiveness of either IRA. If eligible, the maximum 2002 contribution for both a Roth and traditional IRA is $3,000 ($3,500 for those 50 years old or older). 2002 contributions must be made April 15, 2003.

Roth IRA advantages:
Roth IRAs provide tax-free growth and eligible distributions are never taxable. This makes a Roth more attractive the longer they have to grow.

Roth IRAs are generally more flexible than traditional IRAs. Roth IRAs do not have a minimum age that a taxpayer must begin taking distributions or stop making distributions to their IRA.

Income phaseout limits are higher for a Roth IRA than a traditional IRA.

Accumulations of earnings in a Roth IRA can be transferred to beneficiaries tax free. Beneficiaries pay tax on inherited traditional IRAs.

Roth IRAs have more withdrawal flexibility. Contributions to a Roth IRA are returned tax and penalty free before earnings. Nondeductible contributions to traditional IRAs have to be withdrawn in proportion to taxable earnings.

Roth IRAs favor taxpayers who expect to be in a higher tax bracket when they retire.

Traditional IRA advantages
Eligible contributions to a traditional IRA are deductible on a taxpayers Form 1040.

For those close to retirement age and needing to withdrawal IRA funds in a few years, the traditional IRA might be preferable.

Note: Spousal IRAs, which are for nonworking spouses or spouses that make less than $3,000, are also available. A traditional or Roth spousal IRA may be opened with maximum 2002 contributions of $3,000 ($3,500 for those 50 years old or older).

If you are interested in opening a new IRA or are going to make a contribution to an existing IRA, please consult with us so that we can review your particular situation in order to determine which IRA is appropriate for you.