Okay, penalty probably is the wrong term for it – maybe the better term would be short-change. You’ve undoubtedly heard of the marriage penalty for income taxes – this is where it can be beneficial tax-wise for two people to remain single than to be married and be forced to file either jointly or separately. The tax code contains several ways that this is true. But did you know that there is a way that married folks might level the field versus singles in the Social Security law-scape? Plus, divorced folks may also have an advantage over singles AND married folks who were never divorced (or who divorced after marriage of less than ten years)? The Marriage Advantage When a worker remains single over his or her working life, there is an inequality in benefits paid out based on his or her record when you compare it to that of […]
February, 2014:
The Alternative Minimum Tax
You may not be aware of this, since income taxes are so complicated that not a lot of folks do much digging into the nuances, but there is another income tax rate that could affect you in certain circumstances. This other income tax is called the Alternative Minimum Tax, or AMT. This “alternative” tax applies when you have income above certain thresholds. Essentially it ensures that you pay a certain minimum amount of income tax if your deductions reduce your income so much that your ordinary income tax falls below the minimum applied by the AMT. It gets pretty complicated, but I’ll go over the high points below. Alternative Minimum Tax (AMT) AMT has a separate set of rules for definitions of income and expenses, rules for accounting and timing, and exemptions and tax rates. AMT limits the tax benefit of certain types of income and deductions, otherwise available to […]
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Market Returns Aren’t Savings
In 2013 the market and those invested in it experienced a nice return on their investments. The S&P 500 rose an amazing 29.6% while the Dow rose 26.5%. Needless to say 2013 was an amazing year for investors – but try not to make the following mistake: Don’t confuse investment returns with savings. While it is true that the more of a return an investor receives on his or her investments the less they have to save it still does not mean that your returns should take the place of systematic saving for retirement, college or the proverbial rainy day. And by no means should you reduce the amount you’re saving thinking that the returns from 2013 and other bull years will repeat and continue their upward bounty. Investment returns are the returns that an investor receives in a particular time frame. For 2013, if an investor was invested in […]
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The One-Rollover-Per-Year Rule: Revised
In a surprising decision, US Tax Court has ruled that the One-Rollover-Per-Year rule applies to all IRAs, rather than to each IRA separately as was previously thought. IRS Publication 590, Individual Retirement Arrangements (IRAs), has the following information in regard to the one-rollover-per-year rule: Waiting period between rollovers. Generally, if you make a tax-free rollover of any part of a distribution from a traditional IRA, you cannot, within a 1-year period, make a tax-free rollover of any later distribution from that same IRA. You also cannot make a tax-free rollover of any amount distributed, within the same 1-year period, from the IRA into which you made the tax-free rollover. The 1-year period begins on the date you receive the IRA distribution, not on the date you roll it over into an IRA. The use of the term “that same IRA” has always been taken to mean that the rule applies […]
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Get Your Kids to Help You With Your Taxes
Sometimes as parents we get overwhelmed with the costs of raising kids. What with the high cost of soccer camp, video games, and lessons on the clarinet, it can be woefully expensive raising kids. Sometimes though, there are surprising ways that kids can help out with costs – and your income taxes is one of those places where having kids does help. The IRS recently published their Tax Tip 2014-11 which lists eight ways that having children can help to lower your taxes. The actual text of Tax Tip 2014-11 follows: Eight Tax Savers for Parents Your children may help you qualify for valuable tax benefits. Here are eight tax benefits parents should look out for when filing their federal tax returns this year. Dependents. In most cases, you can claim your child as a dependent. This applies even if your child was born any time in 2013. for more […]
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Have a HEART
Yes, I am organizing this writing around Valentine’s Day as a clever way to introduce a benefit military service members and their families can take advantage of as well as tie it into the title itself. The Heroes Earnings Assistance and Relief Tax Act or HEART Act provides service members and their families with certain pension and tax benefits while living or in the event of the service member’s death. According to http://myarmybenefits.us.army.mil/ these are some of the benefits that can be taken advantage of due to the HEART ACT: Accelerated vesting in the retirement plan (but not any imputed additional benefit accruals for the period of military service) Additional life insurance benefits Other survivor’s benefits depending on the benefits of the employer Employers also have the choice of treating the disabled or deceased service member as if they had returned to work the day before the disability or death occurred. […]
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Where to get IRS Forms and Publications
When you are preparing your taxes, inevitably you run across a form or publication that you need in order to complete your filing. But where can you find all these forms and publications? The IRS recently published their Tax Tip 2014-06, which details information about where you can find these forms and publications. The actual text of the Tip follows below. Four Ways to Get IRS Forms and Publications The IRS offers free tax forms and publications on many topics. Here are four easy ways to get the tax products you need from the IRS: On the Internet. Get everything you need 24 hours a day 7 days a week on www.IRS.gov. To view and download tax products, click on the ‘Forms and Pubs’ tab. Many products appear online before they’re available on paper. Order by phone. Call 1-800-TAX-FORM (1-800-829-3676) Monday through Friday, 7 a.m. to 7 p.m. local time. […]
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Updates to IRS Fees for Installment Agreements and OIC
Just like pretty much everything else in the world, the cost of doing business with the IRS has gone up. The good news is that some fees did not increase for calendar year 2014, but some fees have gone up by significant rates. Installment Agreement This is where you have a balance due to the IRS for unpaid taxes, penalties and interest, and you’re unable to pay the amount at the present time in a lump sum. So you set up an installment agreement with the IRS – where you agree to pay a set amount on a monthly basis until your balance is paid off. If you set up a direct-debit payment plan – where the payment is pulled directly from you bank account – the fee to set this up remains unchanged from 2013 at $52. This is the preferred method to set up such a plan, for […]
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Codes of Ethics – A Reflection
Codes of ethics can be an effective means of guiding and directing personal behavior – I believe this is true as long as the person adhering to the codes actually adheres to and believes in them. Otherwise it’s just words memorized for an exam or used in vain in a feeble marketing attempt to gain clients. Perhaps I am being too harsh or too opinionated, but for me, codes of ethics or any type of code for that matter such as the Code of Law, the Internal Revenue Code are pretty uniform and significant words that are to be followed appropriately. As mentioned above however, the Code of Law or the Internal Revenue Code are only going to be followed and upheld by those who believe in following them – there will of course be those that choose not to follow those codes and break the law. Granted, codes of […]
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myRA? What’s the point?
After the President’s state of the union announcement of the new myRA account, my first reaction was: Did we need this? What’s so “out of reach” about a regular Roth IRA? And if there was a great hue and cry for this, why hasn’t the marketplace provided it already? After all, there are custodians who will provide a no-fee Roth IRA with no account minimum already (TD Ameritrade comes to mind). Plus, there are plenty of ways to get a bond-like return with no costs or account minimums as well. All that I can find that is different about the myRA accounts is that the bond investment (same as the TSP “G” fund) has downside protection – meaning that the funds in the myRA account will never reduce in value, only grow or stay the same. As with any gift (and downside protection is indeed a valuable gift), there is […]
Sterling Raskie, MSFS, CFP®, ChFC®
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