So your taxes are filed, (they are, aren’t they? or you filed an extension). What now?
Well I hope you had a refund, but if you had a balance due this year, take this opportunity to start your organizing for next year and doing some tax planning now. You can very rarely impact your tax situation after December 31st of the tax year, so in keeping with the season, do some spring cleaning and archive your 2009 documents and organize folders for the documents that you will need when you talk with your tax professional in 2011. Consider spending one of your money dates going over all the items that you jotted down while you were talking to your tax professional. You know, all those items that you hadn’t kept any documentation for, but which you could have made a valid claim if you had. Also, think about whatever life changes you expect to occur this year that may impact your tax situation either positively or negatively so that you may take defensive action to try to make it as positive as possible.
If you have a new child in 2010, you will be eligible for the $1000 child tax credit. If your child turned 16 in 2009 however, you will not be able to claim the child tax credit in 2010, so plan for the loss of that $1000 credit. Change your W4 to reflect your current situation, so that you do not have an unpleasant surprise when you go to prepare your taxes.
The better records you keep, the better chance you have of taking advantage of all the tax deductions that are legally available. I know, last year your tax professional said not to bother to keep your medical receipts, because you couldn’t itemize, or it was more advantageous for you to claim the standard deduction, but who knows, you may have enough to make a claim this year… and so it is with many items. Your tax situation is generally dynamic, your life events change, your life stages change, congress changes laws, so if you are expecting the same refund that you received last year, and your child turned 16 last year as mentioned above, it may not be possible without some planning.
Yet, for 2009, even if you couldn’t itemize you could still increase your standard deduction if you paid property taxes, or if you had purchased a new car after February 16th, 2009, (sales tax amount increased your standard deduction).
Keep track of your charitable contributions, and insist that you receive a receipt from the charity when you make your donation. If your donation is worth more that $5000, you will need to have it appraised, and keep that dated documentation. Churches will give you a receipt if you ask.
If you claim mileage for your business, medical miles, or volunteer miles, keep a log of your miles, location and purpose of the trip. Note your mileage on Jan1 and Dec 31. Also keep any documentation where a 3rd party validates your mileage, e.g. at an oil change, or when you take your car in for repair. If you claim the actual operating expenses for your business – keep track of all those items which include repair and maintenance (e.g. gasoline, oil, tires, car detailing, etc.), registration, inspections, parking and tolls.
You can claim the sales tax on your purchases if you itemize. Does that mean that you have to keep track of all your receipts, well no, you are allowed a calculated amount based on your income, and the sales tax rate of your state, called a safe harbor amount. You are also allowed to add to that amount the sales tax from vehicle purchases (including cars, boats, motor-bikes etc.) and home building materials. However, if you made large purchases on credit it is possible that your sales tax deduction could actually be more than the calculated amount – in this case you would have to track the sales tax on all your purchases, but the effort may be worth it.
If you are a teacher, keep track of the items that you purchased for your class – you can claim up to $250, but you must keep your receipts.
If your child is in college, and you are eligible for the American Opportunity Credit, keep all the receipts for books purchased and equipment purchased (including a computer). Also keep track of the actual amount of tuition that you pay, so you can validate the information that the school sends to you. If your numbers do not match the school’s numbers – contact them early to find out why.
Your tax-file will be different from everyone else’s – so take a cue from your 2009’s taxes and adjust as necessary. Please drop me a line and tell me how you organize for tax season.
4.29.2010
12.02.2009
Year End Tax Planning
Hello everyone, it’s that time of year again, time to look alive. Sorry this post is so long but its important information and the post break on this system isn't working, Google claims it's working on it.
Yes, I know you are getting ready for the holidays and that alone can be overwhelming, but I want you to remember that you have less than 30 days to make any last minute decisions to positively affect your tax liability for the 2009 tax year. Yep, you’ve got to take action by December 31st for it to matter this year.
Review the items below to see whether you can direct things in your favor financially. Talk with your tax advisor to see if any of these items have a place in your financial position.
Yes, I know you are getting ready for the holidays and that alone can be overwhelming, but I want you to remember that you have less than 30 days to make any last minute decisions to positively affect your tax liability for the 2009 tax year. Yep, you’ve got to take action by December 31st for it to matter this year.
Review the items below to see whether you can direct things in your favor financially. Talk with your tax advisor to see if any of these items have a place in your financial position.
Retirement Distribution Penalty Exceptions
If during the tax year you took a distribution from your 401K or your IRA, and you did not have taxes withheld, you will probably owe quite a bit of taxes, as your distribution is taxed as ordinary income and, if you took the distribution before reaching age 59 ½ you will likely also owe a 10% penalty.
If you made a direct rollover from one brokerage house to another (which is generally the safest way to do it), or if you took possession of the funds and rolled it over yourself, neither the tax or the penalty will apply, until you actually decide to have the proceeds distrbutable to you.
So if you actually received a distribution before you were 59 1/2, you will still be responsible for the ordinary income taxes on the distribution, but you may reduce or eliminate the 10% penalty using one of these exceptions.
For either a 401K or IRA distribution:
a. If your medical expenses are over 7 ½ % of your adjusted gross income (you do not have to itemize to take advantage of this).
b. If you are totally and permanently disabled
c. If the IRS levied your account.
d. If you take equal periodic payments over your life expectancy
e. If the distribution was made after the death of the account owner
f. If you are a qualified reservist serving on active duty for at least 180 days.
For IRAs only:
g. If you used the amount to pay for higher education including room and board, for either yourself, your spouse or your dependent.
h. If you are a first time home buyer – a maximum amount of $10K applies here and is a lifetime limitation (each spouse if eligible).
i. If you paid medical insurance premiums and you were unemployed (see your tax advisor for details)
For 401K’s only:
j. If you separated from service of your company and if your were 55 or older (50 if you are a qualified public safety)
There are other less common exceptions, or see your tax advisor.
NOTE: You may have requested the brokerage house to deduct income taxes from your proceeds, and they may have done so, however, because they are not aware of the rest of your tax life for that year, it may not be enough, particularly if you are married filing jointly (your spouses income would not have been considered). Your tax liability is based on your total income. So you should keep some of the funds in reserve in case you do owe Uncle Sam.
If you made a direct rollover from one brokerage house to another (which is generally the safest way to do it), or if you took possession of the funds and rolled it over yourself, neither the tax or the penalty will apply, until you actually decide to have the proceeds distrbutable to you.
So if you actually received a distribution before you were 59 1/2, you will still be responsible for the ordinary income taxes on the distribution, but you may reduce or eliminate the 10% penalty using one of these exceptions.
For either a 401K or IRA distribution:
a. If your medical expenses are over 7 ½ % of your adjusted gross income (you do not have to itemize to take advantage of this).
b. If you are totally and permanently disabled
c. If the IRS levied your account.
d. If you take equal periodic payments over your life expectancy
e. If the distribution was made after the death of the account owner
f. If you are a qualified reservist serving on active duty for at least 180 days.
For IRAs only:
g. If you used the amount to pay for higher education including room and board, for either yourself, your spouse or your dependent.
h. If you are a first time home buyer – a maximum amount of $10K applies here and is a lifetime limitation (each spouse if eligible).
i. If you paid medical insurance premiums and you were unemployed (see your tax advisor for details)
For 401K’s only:
j. If you separated from service of your company and if your were 55 or older (50 if you are a qualified public safety)
There are other less common exceptions, or see your tax advisor.
NOTE: You may have requested the brokerage house to deduct income taxes from your proceeds, and they may have done so, however, because they are not aware of the rest of your tax life for that year, it may not be enough, particularly if you are married filing jointly (your spouses income would not have been considered). Your tax liability is based on your total income. So you should keep some of the funds in reserve in case you do owe Uncle Sam.
8.24.2009
Tired Of Being Jerked Around by your Credit Card Company?
A friend called me up recently and said “OK, Ms. Personal Finance, what are these people doing? I have been paying down my credit card balance, but all the card company keeps doing is reducing my available credit.” I said, “Welcome to the new credit card world, if you can, you should try to find a new card company. Not only is the practice inconvenient, but it may even be hurting your credit score.”
The credit card companies are attempting to make as much hay as they can while the sun shines. They are scrambling to ensure they can eke out the maximum revenues possible from you, their “clients” before the new credit card reform goes into action full-force.
As I was doing some research to help my friend find a new card company, I stumbled upon Rob Lieber’s article in the New York Times “It May be Time to Find a New Credit Card” and since I agreed with him for the most part, I’ll let you read it yourself, via a link at the bottom of this article.
I do believe that this moment in our economic life, gives us the space to put better financial practices into place. One practice I would definitely suggest is reducing the grip of credit cards.
Folks who are considered “good credit card customers” by the credit card companies, are generally folks who have “bad credit card practices,” they make late payments, go over their credit limit, pay minimum balances – all the things that provide lots of revenues for the card companies. Yet, the card companies are clamping down on both good and bad customers alike. For instance, they are reducing the available credit on cards and they are closing down cards that you use infrequently. They are also hiking up your interest rates – putting into effect that “universal clause” that allows them to hike the rate on your credit card, even if you have never missed a payment on that card. The universal clause allows the card companies to raise your interest rate, if you are late on any other bill that is reported to a credit reporting agency. Sneaky, huh!
So why are the card companies clamping down on these people? Well, in a good economic climate, these folks would keep on paying their minimum payments, their late fees, their over the limit fees etc., while the credit card companies continued raking in big bucks, but in a more murky economic climate, there is a real possibility and lets say probability that many of these users may not be able to continue paying these extra charges, because with fewer dollars all around, who can keep up this practice long term. The card companies certainly do not want to be left holding the bag. Even for folks who do not abuse credit cards, by necessity, credit cards may become more of a life-line and less of a convenience, until this meager period passes on.
So lets get back to basics. Make a plan to get out of the grip of those credit cards. Pay those balances down, but also think about which card company you want to do business with. Make these changes work for you.
Ron Lieber's article: It May be Time to Find a New Credit Card.
The credit card companies are attempting to make as much hay as they can while the sun shines. They are scrambling to ensure they can eke out the maximum revenues possible from you, their “clients” before the new credit card reform goes into action full-force.
As I was doing some research to help my friend find a new card company, I stumbled upon Rob Lieber’s article in the New York Times “It May be Time to Find a New Credit Card” and since I agreed with him for the most part, I’ll let you read it yourself, via a link at the bottom of this article.
I do believe that this moment in our economic life, gives us the space to put better financial practices into place. One practice I would definitely suggest is reducing the grip of credit cards.
Folks who are considered “good credit card customers” by the credit card companies, are generally folks who have “bad credit card practices,” they make late payments, go over their credit limit, pay minimum balances – all the things that provide lots of revenues for the card companies. Yet, the card companies are clamping down on both good and bad customers alike. For instance, they are reducing the available credit on cards and they are closing down cards that you use infrequently. They are also hiking up your interest rates – putting into effect that “universal clause” that allows them to hike the rate on your credit card, even if you have never missed a payment on that card. The universal clause allows the card companies to raise your interest rate, if you are late on any other bill that is reported to a credit reporting agency. Sneaky, huh!
So why are the card companies clamping down on these people? Well, in a good economic climate, these folks would keep on paying their minimum payments, their late fees, their over the limit fees etc., while the credit card companies continued raking in big bucks, but in a more murky economic climate, there is a real possibility and lets say probability that many of these users may not be able to continue paying these extra charges, because with fewer dollars all around, who can keep up this practice long term. The card companies certainly do not want to be left holding the bag. Even for folks who do not abuse credit cards, by necessity, credit cards may become more of a life-line and less of a convenience, until this meager period passes on.
So lets get back to basics. Make a plan to get out of the grip of those credit cards. Pay those balances down, but also think about which card company you want to do business with. Make these changes work for you.
Ron Lieber's article: It May be Time to Find a New Credit Card.
7.30.2009
Hurry, Last Day for DTV Converter Box Coupons
This is it. Last Day for DTV Converter Box Coupons
If you still have analog TVs in your arsenal, today is the last day that your application for a subsidized coupon will be accepted. You can apply via FAX, mail, phone or online.
Mailed applications must be postmarked by today, July 31st.
Coupons expire 90 days after they have been mailed.
If you still have analog TVs in your arsenal, today is the last day that your application for a subsidized coupon will be accepted. You can apply via FAX, mail, phone or online.
Mailed applications must be postmarked by today, July 31st.
Coupons expire 90 days after they have been mailed.
Here's a Way To Get That New Car
Cash for Clunkers!!!
Update on 8/5/09: The House and Senate have passed a bill to increase the "Cash for Clunkers" program by $2 billion. Its now available for the President to sign. So you have a FEW weeks to cash in on this program. Remember, if you can privately get more than $4500 for your trade, you may be better off, selling your car outside of this program.
Update on 7/31/09: Oops... I was mistaken, it was $250m left, not used after just one week of the CARS program. The program will be extended by another billion dollars or so, but the restrictions may get tightened, so hurry in...
Woohoo!!! Here's a great opportunity to trade in that low gas mileage auto that you have had for years. The government program will give you a voucher for $3500 to $4500 if your old car or truck has a combined mileage of 18mpg or less.
Update on 8/5/09: The House and Senate have passed a bill to increase the "Cash for Clunkers" program by $2 billion. Its now available for the President to sign. So you have a FEW weeks to cash in on this program. Remember, if you can privately get more than $4500 for your trade, you may be better off, selling your car outside of this program.
Update on 7/31/09: Oops... I was mistaken, it was $250m left, not used after just one week of the CARS program. The program will be extended by another billion dollars or so, but the restrictions may get tightened, so hurry in...
Woohoo!!! Here's a great opportunity to trade in that low gas mileage auto that you have had for years. The government program will give you a voucher for $3500 to $4500 if your old car or truck has a combined mileage of 18mpg or less.
6.25.2009
Tax Planning - First $2,400 of Unemployment Benefits Tax Free for 2009
If you receive unemployment benefits this tax year (2009) all or part of it may be tax-free.
The American Recovery and Reinvestment Act, makes the first $2,400 of unemployment insurance exempt from tax. So you can exclude the first $2400 of these benefits when you file your tax return next year. If you are married, the exclusion applies to each spouse separately.
The American Recovery and Reinvestment Act, makes the first $2,400 of unemployment insurance exempt from tax. So you can exclude the first $2400 of these benefits when you file your tax return next year. If you are married, the exclusion applies to each spouse separately.
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