Asset Planning, Inc Blog

The latest from the team.

Carol Somoano, MBA, CFP®
Financial Advisor

Carol Somoano, Vice President of Asset Planning Inc., is a Certified Financial Planner, CFP®, and is responsible for portfolio and financial plan analysis. Before Carol joined API, Inc in 2005 she worked as a management accountant for 15 years before deciding to concentrate on financial planning. ...

Carol Somoano, MBA, CFP®
Financial Advisor

Carol Somoano, Vice President of Asset Planning Inc., is a Certified Financial Planner, CFP®, and is responsible for portfolio and financial plan analysis. Before Carol joined API, Inc in 2005 she worked as a management accountant for 15 years before deciding to concentrate on financial planning.  Carol obtained her B.S. in accounting from Cal Poly Pomona and her MBA from Cal State Fullerton.  She completed the UCI Financial Planning program and passed the CFP exam in March of 2004.  She is also a Notary Public and Realtor®

She is an active member of the Orange County Financial Planning Association and has participated in the OC Register Annual Financial Planning Hotline.  She is an active volunteer in her community and has received an Honorary and Continuing Service Award from the California State Legislature in 2003 and 2007.

Carol’s core values are client-focused, emphasizing long-term relationships built on confidence and trust.  She works diligently to increase her client’s net worth, plan for their future, and ultimately enhance their lives today.

Carol's hourly financial planning rate is $250. Carol's portfolio management fee is a maximum of 1% and is discounted for portfolios over $250,000.

PH: 714-827-5794 | Email Carol 


1099 IRS Revised Deadlines

Just a quick blog to let you know that the IRS has revised the upcoming delivery deadline for 1099 tax statements for the 2009 tax year from January 31 to February 16, 2010. The IRS increased the deadline in an effort to reduce the number of 1099 revisions that many mutual fund clients receive. Last year it was not unusual for clients to receive 2 or 3 revisions. The revisions are mainly due to the reclassification of dividends from qualified to non-qualified and vice-versa. The custodians we use, TD Ameritrade and Charles Schwab, are making the 1099's available on-line and mailing them out by 2/16/2010. If you do not receive your 1099, go on-line to the document section and click on tax forms to see if it is available. Or you can call or email us and we can send it to you via email or fax.

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Year End Tax Deadlines

The end of the year is coming upon us very quickly. Here are some important dates/deadlines to beware of:

December 10 - 1st installment of property taxes are due.

Charitable Contributions - The last date to make a charitable donation that can be deducted from your return is December 31, 2009.

If you contribute to a 401K/403b/457 retirement account, check to see if you have put in enough:
The limits for 2009 are $16,500 if you are under age 50;
and if you are over 50 you may contribute another $5,500 for a total of $22,000.

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Roth IRA Conversion

There's been a lot of conversation and buzz about the new rules for converting Traditional IRA accounts to Roth IRA's in the year 2010. Basically, there will be no income limits and everyone is eligible to convert their Traditional IRA to a Roth IRA.

What does this mean and is it something you should consider?

There are 2 types of IRAs – traditional and Roth. The tax deductible traditional IRA (including IRA rollovers & SEP IRAs) is funded with pre-tax income and lowers your income for tax purposes. The money grows tax free until you withdraw it and at that time you pay ordinary income tax rates on the entire amount withdrawn. There is an additional 10% penalty if you withdraw funds before age 59 ½. The IRS requires you to take minimum distributions at age 70.5.

A Roth IRA is funded with after tax income but you can only contribute if your Adjusted Gross Income is under $105,000 if you are single and $166,000if you file jointly. You can withdraw money tax free as long as you have the Roth for 5 years and you are older than 59 ½. You are not required to take mandatory distributions.

Currently, you are not allowed to convert from a Traditional IRA to a Roth IRA if your income is over $100,000 but in 2010 (and only 2010) there will be no income limits.

If you convert, you will owe taxes on the entire conversion amount. The new rule allows you to paythe entire tax due in 2010 or you can elect to pay ½ of it in 2011 and ½ of itin 2012.

Should you convert? There is not a one size fits all answer. Every situation is unique. While the calculation is fairly easy, there are many assumptions that the decision should be based on:
What is your tax rate now vs. what will it be a tretirement?
What will your tax rates be in 2011 and 2012 when the tax is due?
Will tax rates rise? We don't know, but they may.
Can Congress change the rules on tax-free withdrawals of the Roth in the future? It is always possible.
Will your income drop or be the same or more in retirement?
The funds to pay the tax need to come from funds outside the IRA. Would those funds be better invested elsewhere? Be cautious on the assumptions you use for inflation, future income tax rates and the rate of return of the IRA.

Everyone's situation and goals are different, so before you decide, consult your Certified Financial Planner or your CPA.

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Homebuyer Tax Credit Extended

President Obama signed into law today the extension and expansion of the homebuyer tax credit. The tax credit will be extended through April 30, 2010, with a 60 day extension if a binding contract is in place prior to the deadline. First time home buyers will continue to receive a tax credit of up to $8,000, while existing homeowners will receive a credit of up to $6,500. Existing homeowners will be eligilbe for the $6,500 if they lived in their current residence for at least 5 years.

The credit is available for the purchase of principal homes costing $800,000 or less, meaning vacation homes are ineligible. The credit will be phased out for individuals with annual incomes over $125,000 and for joint filers with incomes above $225,000. Also added was that taxpayers can claim the credit on purchases completed in 2010 on their 2009 income tax returns. The credit does not have to be repaid, provided the home remains their primary residence for at least 36 months.

Also added to this bill was to extend unemployment benefits to those who have exhausted their benefits by the end of the year. They will receive 14 additional weeks if their states unemployment rate is under 8.5% and 20 weeks if the rate is higher (e.g., California). This is estimated to help 2 million people.

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Dow Hits 10,000

The Dow Jones Industrial Average reached 10,000 today for the first time since October 7, 2008. The Milestone was led by strong earnings reports from Intel and JP Morgan. Oil also reached a one year high today at $75/barrel. And the VIX (Volatility Index Indicator) hit a 52 week low, meaning that investors are more positive.

The first time the Dow hit 10,000 was March 29, 1999. Here are some interesting facts of then vs. now:
Gas was $1.20/ gallon
Gold was $280/ounce vs. $1,060/ounce today
The Dollar index, as compared to other currencies, was 100.36 and today it is 75.60 - 25% weaker!
US debt was $24.6 billion and today it is $50.8 billion and growing.

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Identity Theft

Last week I attended the FPA (Financial Planning Association) of Orange County Quarterly Education meeting. One of thepresenters, John Sileo, was an identity theft expert. He became an expert because he was a victimof identity theft 2 times. Once bypeople that went through his garbage and were able to get his information, andonce by a business partner who had access to all of his information.

I wanted to share some of the important points he made.

The most important point is that your identity is an assetworth protecting.

He suggests that you put a credit freeze on your credit withall 3 credit bureaus – Experian, Equifax and Transunion. This means that you cannot obtain new creditunless you approve it. It does notfreeze the credit you already have. Ifyou want credit for a car loan or any credit, you need to call the creditbureaus and pay a fee to unfreeze the credit for a short time. It is worth the time and effort.

Stop your junk mail. Either call 1-888-5-OPTOUT or go to

Invest in a confetti shredder and use it to shred alldocuments that have identifying information on them.

Monitor your credit. is run by the 3 main credit bureaus and it is free. If you want your credit score there is a fee.

He also thinks that on-line banking and bill paying is saferthan paying by mail. A check sent out by the bank has the bank's account number (and routing) on it, not yours.

He also has great suggestions on protecting your computersand laptops on his website –

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New Proposed Tax Deduction for your pet....

US Representative Thaddeus McCotter of Michigan (unemployment rate of 15.2%) recently proposed a new bill which would give animal owners a tax deduction for qualified pet expenses up to $3,500. The goal of this deduction is to make it more affordable to provide for your pets and hopefully discourage owners from abandoning their pets. Right now, people can deduct for their own medical expenses ONLY those costs that are over 7.5% of their Adjusted Gross Income. So the tax treatment for your pet expenses would be better than your own. This bill has encouraged a lively debate among the American public, with most people thinking it is ridiculous. The bottom line is if you can't afford a pet then don't get one. I really don't think this bill will go far, but it is getting plenty of press coverage.

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BEWARE! Property Tax and Loan Modification Scams

Back in December I blogged about property tax appraisal scams. I want to reemphasize that there is NEVER any fee for the county to review a property tax reassessment or appeal. I just refinanced my house and I have been inundated with offers from these companies that state that if I send money that my property tax will be lowered or reviewed. They actually sent me a copy of my Grant Deed to make it look official. Anyone can get a copy of a Grant Deed or property information from the county. The information is public and fairly easy to access. The only time you send money in regards to your property taxes is when you pay the actual property tax bill. If you have questions about your property value assessment, please go to the county website. The Los Angeles County website is: and the Orange County website is:

Another scam that is occurring is with loan modifications. These scam artists are targeting at-risk homeowners by getting information in newspapers and public sites about homes in foreclosure status. They use deceptive marketing practices to convince homeowners that they are reputable and that they represent the government. One tip is you should not have to pay for help. The government offers HUD-approved counseling for free. Another tip is to ask for the local address of the company and then go and visit it to see if it is legitimate. Referrals from other clients are also a good source. Just remember, if you or your family or friends are in this situation to be skeptical and cautious if you are asked to pay fees.

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FDIC Extends Coverage Limit And New Credit Card law

Last week, President Obama signed an extension to keep theincreased FDIC limits until December 31, 2013. If you have anaccount insured by the FDIC then you are insured up to $250,000 per depositoror $500,000 for a joint account. Theselimits were originally set to expire at the end of 2009.

President Obama also signed a new credit card law that becomeseffective in 2010. Here are some highlightsof the changes.
CreditCard companies will not be able to raise rates on existing balances except ifthe card has a variable rate or there is a late payment.
Promotionalrates have to last at least 6 months.
Ifa consumer pays more than the minimum then the excess payment must go to payoff the higher interest rate balance first.
Requirespayments due at least 21 days after the bill was mailed.
Requiresanyone receiving a credit card under age 21, they must have parent or legalguardian sign that they are responsible for the debt.
Thereare also limits on fees that can be charged for late payments and over-limitcharges.

The critics think that this will mean that more credit cardswill have annual fees and there will be less reward programs because the creditcard companies will have less revenue sources.

This law only affects credit cards issued by banks. Credit Unions are not affected by thisregulation because they have their own rules and they already had guidelinessimilar to this in place.

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Pension Lump Sum Distributions

The market downturn of the past year will affect future pension payouts. If your company offers a pension plan this will probably affect you. Most pensions allow the retiring employee to choose to receive their pension as a lump sum rollover or as an annuity. The annuity is guaranteed for life, but there is usually no cost of living increases. Most employees opt for the lump sum payout, assuming it can be managed to receive better returns than the company. Also, if you don't think the company will be in business during your entire retirement, this could be due to bankruptcy or a merger or takeover, then the government via the Pension Benefit Guarantee Corporation has to take over the plan. If this happens there is a maximum annual annuity. Currently, the limit is $54,000/year.

A company cannot offer the lump sum payout if the pension is less than 80% funded. Businesses must update their funding status annually by October 1. It is widely believed that many pensions have lost value due to the falling stock market and will fall below the 80% funding limit. This limit is put in place by the Government to prevent pensions from being drained of cash, when assets are low. This law (The Pension Protection Act) has been around since 2006, but hasn't been much of an issue until this year.

If you have a choice, you should analyze the different pay-out alternatives before you decide. It is a very important decision and you should consult a Certified Financial Planner to help guide you in the decision.

Carol Somoano

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