Wednesday, December 30, 2009
Thursday, December 24, 2009
Friday, December 18, 2009
Wednesday, December 16, 2009
Tuesday, December 15, 2009
Health Insurance. Are you among the lucky few who will continue to be covered after retirement? If not, you'll need to replace the coverage. If you will be eligible for Medicare, you may want to start checking up on "Medigap" coverage.
- Tip: Before you retire, take care of any non-emergency medical, dental, or optical needs (if your employee plan coverage is broader than Medicare).
Other Types of Insurance. Once you retire, you may need to replace employer-provided life insurance by buying added life coverage. You should also consider purchasing long-term health care insurance to cover the risk that you'll need a lengthy nursing home stay in the future.
Social Security. Decide whether you want to take early Social Security benefits if you're retiring before your full retirement age. You can get 80% of your benefits at age 62.
- Tip: For most people, taking Social Security benefits at their full retirement age makes the most financial sense. Be sure to discuss this with a financial advisor if you think you might need to take early benefits.
Company Plan Payout. It's important to plan well in advance how you'll take the payout from your pension plan or 401(k) plan. Will you transfer the funds to an IRA? How will the funds be invested?
Relocation. If you're planning on moving to another state, check out various states to see what the financial ramifications of living there will be.
- Tip: If you'll be relocating, it might be a good idea to buy the new home before retirement.
Thursday, December 10, 2009
- Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of 2009 count for 2009. This is true even if the credit card bill isn’t paid until 2010. Also, checks count for 2009 as long as they are mailed in 2009 and clear, shortly thereafter.
- Check that the organization is qualified. Only donations to qualified organizations are tax-deductible. IRS Publication 78, available online and at many public libraries, lists most organizations that are qualified to receive deductible contributions. The searchable online version can be found at IRS.gov under Search for Charities. In addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations, even if they are not listed in Publication 78.
- For individuals, only taxpayers who itemize their deductions on Form 1040 Schedule A can claim deductions for charitable contributions. This deduction is not available to individuals who choose the standard deduction, including anyone who files a short form (Form 1040A or 1040EZ). A taxpayer will have a tax savings only if the total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceed the standard deduction. Use the 2009 Form 1040 Schedule A, available now on IRS.gov, to determine whether itemizing is better than claiming the standard deduction.
- For all donations of property, including clothing and household items, get from the charity, if possible, a receipt that includes the name of the charity, date of the contribution, and a reasonably-detailed description of the donated property. If a donation is left at a charity’s unattended drop site, keep a written record of the donation that includes this information, as well as the fair market value of the property at the time of the donation and the method used to determine that value. Additional rules apply for a contribution of $250 or more.
- The deduction for a motor vehicle, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value is more than $500. Form 1098-C, or a similar statement, must be provided to the donor by the organization and attached to the donor’s tax return.
- If the amount of a taxpayer’s deduction for all noncash contributions is over $500, a properly-completed Form 8283 must be submitted with the tax return.
To figure the value of items you have donated, please contact me so that we can put together accurate valuations.
Tuesday, December 8, 2009
A Section 529 plan is a tax-favored way to save for a student’s college education. For starters, you can set aside generous amounts in a state-sponsored savings plan. There’s no current tax on accumulations within the account, and distributions are tax-free if used to pay for tuition, room and board, and other qualified college expenses.
With college savings plans, however, you’re the one taking investment risk. These plans, also sponsored by states but generally available to out-of-state investors as well, let you spend your money on any public or private college. And though the investment menus vary widely from one 529 to the next, many plans offer a range of options similar to those in a 401(k) retirement plan. Most provide age-adjusted accounts that shift from more aggressive, stock-dominated portfolios when a child is young to more conservative, largely fixed-income allocations when college age approaches. But investors also may be able to choose all-stock accounts. Those seemed like a good deal when share prices were rising, but the recent market plunge has hit such accounts particularly hard.
The question, of course, is what to do now if your child’s account has suffered deep losses. You may need to reconsider your investment allocations, and a new IRS rule, in effect only for 2009, permits you to shift investments within a plan twice rather than just once during the year. Your first step, as painful as it may be, is to look at your current 529 account balances and project what they’ll be when your student starts school. Then consider possible changes to your strategy.
- If your child is graduating from high school soon, damage control is in order. It may be tempting to roll the dice on stocks, hoping to recoup some of your losses, but at this point preservation is much more important than growth. An allocation dominated by bonds or cash investments probably makes sense.
- If you have younger children too, consider changing the 529 plan beneficiary to someone who won’t need the funds until the markets have had a chance to recover. Or simply delay making withdrawals until the later years of college. These strategies assume you have other funds available to pay near-term expenses.
- If college is still years in the future, having much of your plan invested in stocks could still be a good idea. Share prices have taken a big hit and may fall further, but being patient and staying invested for the eventual rebound may reward you nicely. Even so, choosing a diversified investment option could minimize volatility and increase potential gains.
- Switching to a prepaid tuition plan now could relieve you of future investment risk. But it will lock in your 529 plan’s losses and also limit your child’s choice of college.
- Increasing current contributions to college accounts could also help make up for the market plunge. With college costs rising quickly and potential sources of financial aid shrinking, having personal savings to draw on will be more important than ever in the years ahead.
Of course, education savings is only one of your many financial priorities. We can help you assess your current situation and work with you to make sure your overall financial strategy remains on track. We can also assist you in filing FAFSA forms.
Monday, December 7, 2009
The Internal Revenue Service has issued the 2010 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on Jan. 1, 2010, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
50 cents per mile for business miles driven
16.5 cents per mile driven for medical or moving purposes
14 cents per mile driven in service of charitable organizations
The new rates for business, medical and moving purposes are slightly lower than last year’s. The mileage rates for 2010 reflect generally lower transportation costs compared to a year ago.
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Independent contractor Runzheimer International conducted the study.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
Revenue Procedure 2009-54 contains additional details regarding the standard mileage rates.
Friday, December 4, 2009
- At least once a year, write down your investment goals and what strategy you will use to reach them. This will keep you focused.
- Instead of giving money to many different charities, pick a few that are important to you, and give them a larger amount. This type of directed giving not only makes more sense, but will make it easier to track your donations at tax time.
Related Financial Guide: CHARITABLE CONTRIBUTIONS: How To Give Wisely
- Inventory your household possessions, with a camera or camcorder if you desire. Keep the inventory at work or in a safe-deposit box. This inventory will help should you need to submit a homeowner's insurance claim.
- Use one insurance agent and one financial adviser for your transactions.
- If you have doubts about entering into a transaction, don't do it. You will probably save yourself money, time, and aggravation.
Thursday, December 3, 2009
Wednesday, December 2, 2009
The American Recovery and Reinvestment Act (Recovery Act), enacted earlier this year, expanded two home energy tax credits: the nonbusiness energy property credit and the residential energy efficient property credit.
Residential Energy Efficient Property Credit
Homeowners going green should also check out a second tax credit designed to spur investment in alternative energy equipment. The residential energy efficient property credit, equals 30 percent of what a homeowner spends on qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property. Generally, labor costs are included when calculating this credit. Also, no cap exists on the amount of credit available except in the case of fuel cell property.
Wednesday, November 25, 2009
Monday, November 23, 2009
The credit, created by the American Recovery and Reinvestment Act of 2009, is in effect for tax years 2009 and 2010. The credit is advanced to taxpayers through their wages by modified income tax withholding tables, TIGTA said. This decreased federal withholding “creates the vulnerability that some taxpayers may have their taxes underwithheld at the end of Tax Years 2009 and 2010,” it said.
TIGTA's analysis of the new withholding tables and the credit amount taxpayers are supposed to receive identified individuals who would receive more of the credit than they were entitled to get, TIGTA said. The modifications to the withholding tables do not take into account situations such as:
• dependents who receive wages,
• single taxpayers holding more than one job,
• taxpayers who receive pension payments, and
• Social Security recipients who receive wages, among others.
More than 1.2 million taxpayers who fall in these categories may have to repay some or all of the tax credit and may be assessed the estimated tax penalty or an increased tax penalty as a result of the credit, TIGTA said.
IRS is going to notify taxpayers that they can request a waiver if they are assessed the penalty or if they believe it will affect them, according to an IRS spokesman, but it is not sure what form such guidance will take.
The full text of the TIGTA report, Millions of Taxpayers May Be Negatively Affected by the Reduced Withholding Associated With the Making Work Pay Credit, No. 2010-41-002, is available at: http://www.treas.gov/tigta/auditreports/2010reports/201041002fr.pdf.
Thursday, November 19, 2009
"It complicates and muddies what should have been a straightforward agreement by UBS and the Swiss government to disclose Swiss accounts hidden from the United States by U.S. account holders," said Levin, D-Mich.
Monday, November 16, 2009
Wednesday, November 11, 2009
Monday, November 9, 2009
Unlike the Cash for Clunkers program which rolled out before the guidelines were in place, this time the federal government is being a bit more deliberative in setting the standards. That may be partly due to the fact that, although it is a federal program, each state will have a say in the details. A key reason for having states take the lead is because they are in the best position to know what appliances are most needed, given the local climate. Obviously air conditioners aren't pumping overtime in Alaska and heating units get less use in Arizona than Indiana.
Twenty-five states already have some sort of appliance rebate, often through utility providers. You may have seen commercials offering $75 cash when you buy a new refrigerator. These rebates themselves have not spurred a great deal of new demand, but the government hopes the new plan in some combination with the old plan and the arrival at holiday time will build a fire under consumers.
Where will the money come from to fund this plan?
The funding for Cash for Refrigerators is already scheduled as part of the American Recovery and Reinvestment Act and totals $300 million. States had until October 15 to submit their plans to the Department of Energy. Once approved, each state should get $1 in rebate money for every state resident. So, the most populous states will get a bigger chunk than those with smaller populations. If history is any yardstick, 10 to 25 percent of the funds will be spent on administrative tasks.
Though most sectors of the economy have suffered recently, the appliance manufacturing industry took a serious double hit. First, as the new home market tanked, so did the demand for new appliances to fill those homes. Then the general economic slowdown caused a drop in appliance replacement as consumers opted to make do with or repair their old models. That translated to serious job losses among manufacturers.
The Obama Administration may have learned a few lessons from the Cash for Clunkers program. It was reasonably successful but poorly run. If you remember, there was a lot of confusion because the credits for new car purchases were made available before the rules for getting and using the credits were even conceived. In the end, the Clunkers program did help boost the auto manufacturing industry, at least in the short term, and the Cash for Refrigerators plan is expected to do the same
How much is the rebate worth?
The estimated amount you may be able to get is between $50 and $200, though with the combination of existing state plans with federal incentives, it could be much more. As states worked out their own programs to meet the October 15th deadline, they had to decide which appliances would qualify, the size of the rebates, and whether or not old appliances must be surrendered.
Critics point out that since there is no overarching requirement that old appliances be surrendered, the desired effect of improving energy use may not happen. Old appliances - which tend to use 10 percent to 30 percent more power -- may still be used as backups, like garage refrigerators, or sold second hand.
"If you buy a new refrigerator, where does the old one go? In the garage, for the beer," Eric Burch told reporters. Burch is the spokesman for the Indiana Office of Energy and Defense Development. "You have not reduced anyone's energy efficiency. The old appliance is still on the grid."
Another criticism of the program is fueled by the question of how many appliances would have been purchased anyway. Case in point, one New York newspaper publicized the state's upcoming Cash for Refrigerators program with this line: "If you need a new appliance for your home, try and hold off until next month."
Here's a quick look at some of the plans that have been proposed.
New York will limit its appliance rebates to washers, refrigerators, freezers, coolers, and dishwashers. Old appliances need not be turned in to receive the rebate. You obtain your rebate by sending the receipt and application to New York State Energy Research and Development Authority. For New York the program will run for one week in February 2010.
- $75 rebate for refrigerators
- $75 for clothes washers
- $50 for freezers
- $500 for a three-appliance package, which includes dishwashers as eligible appliances
Friday, November 6, 2009
President Barack Obama approved the extension as part of a $24 billion economic stimulus bill signed Friday. The bill also includes an extension of unemployment benefits to the longtime jobless and tax credits for some businesses.
The housing tax credit portion of the bill extends the $8,000 tax credit for home buyers who are purchasing their first home from the current November 30 deadline and expands the program to offer a credit of $6,500 to other homeowners who have lived in their current home for at least five years and are seeking to relocate.
Another modification to the original legislation raises the income limits for program participation from $75,000 for a single purchaser to $125,000 and from $125,000 to $225,000 for a couple. There are also credits available on a diminishing basis above those income limits.
The bill was passed by the Senate on Wednesday evening and by the House on Thursday. Both bodies acted in a bipartisan manner which has seldom been seen this year. The Senate passage was unanimous; the House voted 403 to 12 for the bill.
Thursday, November 5, 2009
IRS Seeks to Return $123.5 Million in Undeliverable Refunds to Taxpayers IRS Reminds Taxpayers to Use E-file and Direct Deposit
“We are eager to get this money into the hands of taxpayers, so don’t delay if you think you are missing a refund,” said IRS Commissioner Doug Shulman. “The sooner you update your address information, the quicker you can get your refund.”
All a taxpayer has to do is update his or her address once. The IRS will then send out all checks due. Undeliverable refund checks average $1,148 this year, compared to $990 last year. Some taxpayers are due more than one check.
Average undeliverable refunds rose by 16 percent this year, which is in line with the 16 percent rise in average refunds for all tax returns in the latest filing season. Several changes in tax law likely played a role in boosting refunds, including the First-Time Homebuyer’s Credit and the Recovery Rebate Credit, among others.
The vast majority of checks mailed out by the IRS each year reach their rightful owner. Only a very small percent are returned by the U.S. Postal Service as undeliverable.
If a refund check is returned to the IRS as undeliverable, taxpayers can generally update their addresses with the “Where’s My Refund?” tool on IRS.gov. The tool enables taxpayers to check the status of their refunds. A taxpayer must submit his or her social security number, filing status and amount of refund shown on their 2008 return. The tool will provide the status of their refund and in some cases provide instructions on how to resolve delivery problems.
Taxpayers checking on a refund over the phone will be given instructions on how to update their addresses. Taxpayers can access a telephone version of “Where’s My Refund?” by calling 1-800-829-1954.
The IRS encourages taxpayers to choose direct deposit when they file their returns because it puts an end to lost, stolen or undeliverable checks. Taxpayers can receive refunds directly into personal checking or savings accounts. Direct deposit is available for filers of both paper and electronic returns.
The IRS also encourages taxpayers to file their tax returns electronically because e-file eliminates the risk of lost paper returns. E-file also reduces errors on tax returns and speeds up refunds.
E-file coupled with direct deposit is your best option; it’s easy, fast and safe. Please contact my office for more information or to help with filing your return...800-560-4NFS.