Image by didbygraham via Flickr I’ve received a lot of questions about this. Apparently as folks file their returns for the year, they are finding a difference in the amount of refund that they are due to receive this year versus last year. And as they look for answers, they often focus on the Earned Income Credit (EIC) and wonder if something changed. The answer is – very little changed. Certainly nothing that would have a significant impact on your income tax refund. There was one significant change, in that beginning in 2011 there was no advance payment of the EIC – in years past it was an option available for the taxpayer to receive his or her EIC in advance payments throughout the year rather than waiting until the tax return has been filed. Beginning with 2011, you have to wait to receive the EIC payment. Other than that, […]
January, 2012:
When to File For Social Security Benefits
Image via Wikipedia All future Social Security recipients face this question at some point: When should I file for benefits? As you are likely aware, age 62 is the earliest that you can file for benefits. By filing at this age, you will begin receiving your benefit at a reduced amount – perhaps as much as 30% reduced. Waiting to file until your Full Retirement Age (FRA) will allow you to receive the full benefit amount, without reductions. You could also wait until age 70 to file for benefits, which would result in an overall increase to your monthly benefit amount, by as much as 32% in some cases. Granted, you will have foregone several years’ worth of payments if you wait to file at some age later than 62, but on average, it all works out about the same (with a few exceptions). The way that these reductions and […]
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Pre-Death Planning: Roth Conversion
Image via Wikipedia Financial planning often requires us to face our own certain demise – something that we often don’t want to do, but still a certainty that we all must face. Among the things that we want to do when planning for the inevitable would be to make certain that our surviving loved ones have access to adequate monetary resources to support themselves, in the most cost-effective manner. Another thing that we hope to accomplish is to make the transition as easy as possible for our loved ones. One way to do this is to convert a good portion of your IRA or other tax-deferred funds to a Roth IRA account. Here’s why: By converting to a Roth account, you will make the funds in that account available to your heirs totally tax free. Granted, your estate will also be smaller by the amount of tax that you paid […]
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The Social Security Survivor Benefit – Part 2
Note: you can find the first part of this discussion of Social Security Survivor Benefits at the link. Part 1 covered the basics of Survivor Benefits, and this article covers other considerations with the Survivor Benefit, including non-spouse survivor’s benefits and coordinating the Survivor Benefit with your own benefit. As mentioned in the prior articles, don’t expect to fully understand these calculations and definitions in the first run-through. Check over the other articles (Part 1 here, Spouse Benefits here and especially the further explanation of Spouse Benefits here) for more information, and post questions in the comment section if they come up.
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Net Unrealized Appreciation Treatment
Image by paddynapper via Flickr When you have a 401(k) plan that contains stock in your company, there is a special provision in the tax law that may be beneficial to you. This special provision is called Net Unrealized Appreciation, or NUA, treatment. It allows you to take advantage of potentially lower tax rates on the growth, or unrealized appreciation, of the stock in your company. When your company stock is withdrawn from the account, you pay ordinary income tax only on the original cost of the stock. Then later when you sell the appreciated stock at a gain, you pay capital gains tax (at a lower rate) on the growth in the value of the stock. The Way It Works The distribution from your 401(k) must be a total Lump Sum Distribution in a single calendar year. This means that your entire 401(k) balance, including not only the stock, […]
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Do You Need to File a Tax Return This Year?
Image via Wikipedia Have you ever wondered if it was actually necessary to file a tax return? Perhaps your income is relatively low, and so you wonder if it’s really required of you to file a return. Often it’s not entirely a case of a return being required, but rather it might be in your best interest to file a return in order to receive certain credits against your income. Recently the IRS issued their TAX TIP 2012-02 which goes over some of the things you need to be aware of when considering if it’s necessary or in your best interest to file a return. Portions of this TIP are listed below, with additional information added. Do I Need to File a Tax Return This Year? You are required to file a federal income tax return if your income is above a certain level, which varies depending on your filing […]
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The Social Security Survivor Benefit – Part 1
Image via Wikipedia In a previous article we reviewed the very confusing Social Security Spousal Benefit. That article raised a lot of questions from readers about another confusing provision of the Social Security system: the Survivor Benefit. As with all of these discussions, don’t expect to immediately understand it – this stuff is complicated, and even the Social Security staff often have difficulty explaining it. Read through this carefully, see the referenced articles for background, and then re-read as needed. And ask questions if you have them. The Survivor Benefit is not related to the Spousal Benefit, although certain portions of the article with further explanations of the Spousal Benefit will be useful to review as we discuss the Survivor Benefit. To start with, there are two benefits available to the spouse of a deceased Social Security participant. The first is a small death benefit, amounting to $255 in a […]
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Charitable Contributions From Your IRA – 2012 and Beyond
Image via Wikipedia January 1, 2013 update: Passage of the American Taxpayer Relief Act of 2012 has extended the QCD through the end of 2013. See this article for more details. At the end of December, 2011, the provision for Qualified Charitable Distributions (QCD) expired. That provision allowed the taxpayer age 70½ or older to make direct distributions from an IRA account to a qualified charity, bypassing recognition of the distribution as income. For more information on the expired provision, see the original article about charitable distributions from your IRA. With the expiration of this provision, you can still make charitable contributions of money distributed from your IRA. The difference is that these contributions are no different from a contribution that you’ve made from your savings account or regular income. In order to achieve a tax advantage from the contribution, you will itemize the charitable contribution on your tax return. […]
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2012 MAGI Limits for IRAs – Married Filing Jointly or Qualifying Widow(er)
Image by versal.at via Flickr Note: for the purposes of IRA MAGI qualification, a person filing as Married Filing Separately, who did not live with his or her spouse during the tax year, is considered Single and will use the information on that page to determine eligibility. For a Traditional IRA (Filing Status Married Filing Jointly or Qualifying Widow(er)): If you are not covered by a retirement plan at your job and your spouse is not covered by a retirement plan, there is no MAGI limitation on your deductible contributions. If you are covered by a retirement plan at work, and your MAGI is $92,000 or less, there is also no limitation on your deductible contributions to a traditional IRA. If you are covered by a retirement plan at your job and your MAGI is more than $92,000 but less than $112,000, you are entitled to a partial deduction, reduced […]
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2012 MAGI Limits – Single or Head of Household
Note: for the purposes of IRA MAGI qualification, a person filing as Married Filing Separately who did not live with his or her spouse during the tax year, is considered Single and will use the information on this page to determine eligibility. For a Traditional IRA (Filing Status Single or Head of Household): If you are not covered by a retirement plan at your job, there is no MAGI limitation on your deductible contributions. If you are covered by a retirement plan at work, if your MAGI is $58,000 or less, there is also no limitation on your deductible contributions to a traditional IRA. If you are covered by a retirement plan at your job and your MAGI is more than $58,000 but less than $68,000, you are entitled to a partial deduction, reduced by 50% for every dollar over the lower limit (or 60% if over age 50), and […]
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2012 IRA MAGI Limits – Married Filing Separately
Image by drcw via Flickr Note: for the purposes of IRA MAGI qualification, a person filing as Married Filing Separately, who did not live with his or her spouse during the tax year, is considered Single and will use the information on that page to determine eligibility. For a Traditional IRA (Filing Status Married Filing Separately): If you are not covered by a retirement plan at your job and your spouse is not covered by a retirement plan, there is no MAGI limitation on your deductible contributions. If you are covered by a retirement plan at your job and your MAGI is less than $10,000, you are entitled to a partial deduction, reduced by 50% for every dollar (or 60% if over age 50), and rounded up to the nearest $10. If the amount works out to less than $200, you are allowed to contribute at least $200. If you […]
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Review of 2011 Stats
Ed. Note: As in past years, I’m taking a break from my normal business of posting retirement, tax and other personal financial planning topics to report on the blog itself and the statistics we’ve seen in this, the 8th year of publication for this blog. I’ll be back to regular programming with the next entry. – jb Over the past year, this blog has seen continued growth. This year has been all about Social Security as much as anything. As you know, in October I released A Social Security Owner’s Manual, and many of you have picked up copies, thank you! Through your comments and email questions I have come to meet literally hundreds and hundreds of you over the years – and we’ve learned a lot together. I’ll take this opportunity to thank you for your tremendous support by reading, asking questions, and making comments on what I have […]
Sterling Raskie, MSFS, CFP®, ChFC®
The latest in our Owner’s Manual series, A 401(k) Owner’s Manual, was published in January 2020 and is available on 
A Medicare Owner’s Manual, is updated with 2020 facts and figures. This manual is available on 
Social Security for the Suddenly Single can be found on Amazon at 
Sterling’s first book, Lose Weight Save Money, can be 
An IRA Owner’s Manual, 2nd Edition is available for purchase on Amazon. Click the link to choose the 
Jim’s book – A Social Security Owner’s Manual, is now available on Amazon. Click this link for the 
And if you’ve come here to learn about queuing waterfowl, I apologize for the confusion. You may want to discuss your question with Lester, my loyal watchduck and self-proclaimed “advisor’s advisor”.