Buffington Pockets, Valley of Fire area, southern Nevada (Photo credit: Wikipedia) It happens. You do your best to prepare for the tax you’ll owe, but here it is, time to pay your taxes and you just don’t have the money. The IRS recently published their Tax Tip 2012-64, which relates five tips when you’re faced with just this situation. Below is the text of the Tip. Tips for Taxpayers Who Can’t Pay Their Taxes on Time If you owe tax with your federal tax return, but can’t afford to pay it all when you file, the IRS wants you to know your options and help you keep interest and penalties to a minimum. Here are five tips: File your return on time and pay as much as you can with the return. These steps will eliminate the late filing penalty, reduce the late payment penalty and cut down on interest […]
income tax
Errors to Avoid When Preparing Your Tax Return
Error (Photo credit: pastorbuhro) If you’re deep in the throes of preparing your tax return (as many are) you want to make sure that you avoid errors where possible. The IRS recently published their Tax Tip 2012-58, which details some of the tax preparation errors often seen. Following is the actual text of the Tip. Eight Tax-Time Errors to Avoid If you make a mistake on your tax return, it can take longer to process, which in turn, may delay your refund. Here are eight common errors to avoid: Incorrect or missing Social Security numbers. When entering SSNs for anyone listed on your tax return, be sure to enter them exactly as they appear on the Social Security cards. Incorrect or misspelling of dependent’s last name. When entering a dependent’s last name on your tax return, make sure to enter it exactly as it appears on their Social Security card. […]
Share, tweet, print, email, like or pin this post:
What Charitable Contributions Are Deductible?
Walk for Cancer – it’s raining! (Photo credit: miamism) As you prepare your income tax return, you may find yourself asking the question – how do I determine if a charitable contribution is deductible? In addition, you may have questions about just how to file for the various deductions – such as non-cash deductions, like contributions to Goodwill for example. The IRS recently published their Tax Tip 2012-57, which lists eight tips regarding charitable contributions that you may find useful. The text of the Tax Tip is included here: Deducting Charitable Contributions: Eight Essentials Donations made to qualified organizations may help reduce the amount of tax you pay. The IRS has eight essential tips to help ensure your contributions pay off on your tax return. If your goal is a legitimate tax deduction, then you must be giving to a qualified organization. Also, you cannot deduct contributions made to specific […]
Share, tweet, print, email, like or pin this post:
IRS Helps You Out When Your Boss Doesn’t Pay You Back For Expenses Related to Your Job
Employee Transfer (Photo credit: Wikipedia) When you have to pay for certain expenses in order to do your job, sometimes (if you’ve got a good employer!) your company will reimburse you for those expenses. On the other hand, sometimes they don’t reimburse you for those expenses. Did you know that you can deduct those expenses (to a certain extent) from your income when you file your tax return? And in some cases, when your employer reimburses you, you still need to fill out additional tax forms in order to keep from being taxed on the reimbursements. The IRS recently published their Tax Tip 2012-54, which details how to go about deducting these expenses, and what expenses are qualified for deduction. Below is the text of the Tax Tip in its entirety. Employee Business Expenses Some employees may be able to deduct certain work-related expenses. The following facts from the IRS […]
Share, tweet, print, email, like or pin this post:
Mortgage Debt Forgiveness and Taxes
Image via Wikipedia When you have a debt canceled, the IRS considers the canceled debt to be be income for you, taxable just like a paycheck. There are cases where you don’t have to include all of it though, and mortgage debt forgiven between 2007 and 2012 may be partly excepted from being included as income. The IRS recently issued their Tax Tip 2012-39, which lists 10 Key Points regarding mortgage debt forgiveness. Below is the actual text of the Tip. Mortgage Debt Forgiveness: 10 Key Points Canceled debt is normally taxable to you, but there are exceptions. One of those exceptions is available to homeowners whose mortgage debt is partly or entirely forgiven during tax years 2007 through 2012. The IRS would like you to know these 10 facts about Mortgage Debt Forgiveness: 1. Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act […]
Share, tweet, print, email, like or pin this post:
11 Facts About the Child Tax Credit (2011)
Image via Wikipedia The IRS recently issued their Tax Tip 2012-29, which provides some key points about the Child Tax Credit. Below is the text of the tip: The Child Tax Credit is available to eligible taxpayers with qualifying children under age 17. The IRS would like you to know these eleven facts about the Child Tax Credit. Amount With the Child Tax Credit, you may be able to reduce your federal income tax by up to $1,000 for each qualifying child under age 17. Qualification A qualifying child for this credit is someone who meets the qualifying criteria of seven tests: age, relationship, support, dependent, joint return, citizenship and residence. Age Test To qualify, a child must have been under age 17 – age 16 or younger – at the end of 2011. Relationship Test To claim a child for purposes of the Child Tax Credit, the child must […]
Share, tweet, print, email, like or pin this post:
End of Year Roth Conversion Strategy: Fill Up the Bracket
Image by agrilifetoday via Flickr If you’re in a relatively low tax bracket and have funds in a traditional IRA or Qualified Retirement Plan, chances are you might be in a position to set yourself up with tax-free income via a Roth Conversion. One method that can work in your favor is the “fill up the bracket” technique, and if you want to do this for 2011, you’re running out of time, it must be done by December 30 (December 31 is a Saturday). The way this works is that you determine what your regular income is, and then look at where you are with regard to your tax bracket. If there’s still some “headroom” in the current bracket, you could convert an amount, equal to or less than your “headroom”, from your traditional IRA to a Roth IRA. This way you are controlling the tax rate at which your […]
Share, tweet, print, email, like or pin this post:
Year End Income Tax Planning
Image via Wikipedia Once you’ve reached the last month of the tax year, there aren’t a lot of things that can be done to minimize your income taxes. But there are a few things that could be done. For example, you could double up your real estate taxes by prepaying next year’s tax during December. Doing this with, for example, a $3,000 per year real estate tax bill could result in a reduction of tax for the year of $750 if you’re in the 25% bracket. Keep in mind though, that you’ll have forked out this money long before it is actually due in most cases, and for the next year you won’t have this deduction available if you used it in this year. The same could be done with your charitable contributions – there’s no reason that you can’t make additional contributions to your favorite charities at the end […]
Share, tweet, print, email, like or pin this post:
Expiring Tax Provisions for 2011
Image by polapix via Flickr There are quite a few tax provisions that will be expiring at the end of 2011 – nowhere near the number of provisions that were set to expire at the end of 2010 (many of which were subsequently extended), but still there are quite a few sun-setting this year. Listed below are some of the major provisions that will expire at the end of 2011 that will affect individual taxpayers. Charitable Contributions from IRA The provision that allows an IRA owner, subject to Required Minimum Distributions (RMDs) and over age 70½ to make a Qualified Charitable Distribution (QCD) directly to a charity from his IRA will expire as of 12/31/2011. This provision allows the IRA owner to make this charitable contribution without having to recognize the income – which could have a profound effect on the taxpayer’s return. Remember, this one expired once before, at […]
Share, tweet, print, email, like or pin this post:
2012 Retirement Plan Limits
Image via Wikipedia The new limits for retirement plans in 2012 have just recently been published. The details of these new limits are below: IRA The contribution limit (and therefore the deductible contribution limit) for a traditional IRA remains the same in 2012 as in 2011 – at $5,000. The catch up provision, available to taxpayers age 50 or better, also remains the same at $1,000. If you’re a Single filer and covered by a retirement plan via an employer, the deductibility phases out when your Adjusted Gross Income (AGI) is over $58,000 and phases out completely at an AGI of $68,000. This is an increase of $2,000 over the 2011 phase-out range. If you’re Married and filing jointly and the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is between $92,000 and $112,000, also up from 2011 by $2,000. If you’re not […]
Share, tweet, print, email, like or pin this post:
2012 Income Tax by the Numbers
Recently, the IRS released the updated figures as they apply to 2012 income tax rates and schedules, via Revenue Procedure 2011-52. Below is a summary of the key information from this procedure document. Adoption Assistance The credit for adoption expenses was changed by the Patient Protection and Affordable Care Act of 2010 (and others) such that this credit was increased to $13,170, and the credit became refundable. This provision will expire at the end of calendar year 2011, which will cause the credit to fall back to an amount of $10,000. This amount is then adjusted for inflation, such that the limit for 2012 is $12,650, and remains non-refundable. The limit for adopting a special needs child is the same at $12,650 for 2012. We’ll see if any changes come through to make any changes to the refundability. The modified AGI limits for the phase-out of adoption credit assistance is […]
Share, tweet, print, email, like or pin this post:
The “Tax on Sale of Your Home” Email Myth
Image by Sean MacEntee via Flickr If you have an email address (and let’s face it, who doesn’t?), you’ve likely received this email. In case you haven’t received it, there’s an email that is being forwarded around the internet about a new tax on selling your home – I get at least one of these a month it seems. I’ve copied the text of one of the emails below. This article is to help you understand why the email is a misguided myth, partly grounded in truth but not applicable for most folks. The email is usually forwarded at least a half-dozen times by the time you receive it, making it difficult to know where it started from. In addition, the text of the email is often in large, bold, red font in places, such that you can almost feel the spittle coming off the page at you. Here’s the […]
Share, tweet, print, email, like or pin this post:
Mileage Rate Adjusted for Second Half of 2011
Image via Wikipedia The IRS recently released Announcement 2011-40, in which was announced an increase of 4.5¢ per mile for the standard mileage rates for certain classes of vehicle use. This increase is due to the nationwide increase in gasoline prices. As you may already be aware, so far this year the business mileage rate has been 51¢ per mile. This will remain the same until June 30, 2011, and on July 1, 2011, the rate will increase to 55.5¢ per mile. You’ll have to keep good records (as always) on your mileage in order to properly take advantage of this increase. The medical and moving mileage rates will also increase by 4.5¢ to 23.5¢ a mile, up from 19¢ for the first six months of 2011. The rate for providing services for charitable organizations is set by statute and remains at 14¢ a mile. These rates will remain in […]
Share, tweet, print, email, like or pin this post:
Tax Bill Higher Than You Expected?
Now that you’ve (hopefully) filed your return for 2010, you may have noticed that the bill was higher than you expected. This may be due to some subtle changes to the tax law that affected your return for this year. Listed below are some of the changes that you may have been impacted by: Social Security taxation: Especially if you had unusual income taxed in 2010, such as a Roth Conversion, you could be subject to as much as 85% taxation of your Social Security benefit. Alternative Minimum Tax: If you’ve been impacted by this, not only are your ordinary income tax items taxed at a higher rate, but your capital gains and dividends could be taxed at a rate higher than 15% as well. This happens for folks with incomes between $150,000 and $439,800 (or $112,500 and $302,300 for singles) as the AMT exemption phaseout occurs. Image via Wikipedia […]
Share, tweet, print, email, like or pin this post:
Health Insurance Tax Tips for the Self-Employed
The following list comes to you from the folks over at eHealthInsurance.com: New this year! Take a one-time opportunity to reduce your self-employment taxes – In addition to the standard ‘above the line’ deduction described below, self-employed persons can also deduct the cost of their health insurance premiums from their self-employment taxes on Schedule SE. This is a one-time-only opportunity available for 2010 taxes, so if you’re self-employed be sure to take advantage of it. Image via Wikipedia Deduct health insurance premiums as a business expense – If you had self-employment income, you may also be able to deduct health insurance premiums you paid for yourself and your dependents as an ‘above the line’ business expense (that is, without itemizing) on your federal tax return. Be aware, however, that you may not deduct premiums paid for any month in which you were eligible to participate in an employer-sponsored health insurance […]
Share, tweet, print, email, like or pin this post:
The Roth Recharacterization
1/1/2018 Note: Recharacterization of Roth conversion is no longer allowed as of tax year 2018. The last tax year that you could recharacterize Roth conversions is 2017. See Roth Recharacterization is No Longer Allowed for more details. After all the hoopla around Roth conversions in 2010, now is the time to consider whether or not a recharacterization is in your future. So what is a recharacterization, and how does it work? Recharacterization is the “backing out” of your Roth conversion. In other words, you can literally make the conversion as if it had never been done at all, with your money back in the traditional IRA where it started. Why would you want to do that? Here’s an example: let’s say you converted $100,000 to a Roth IRA in 2010 and you are ready to pay the tax on your 2010 return (you elected out of the spread to 2011 […]
Share, tweet, print, email, like or pin this post:
Why Your Paycheck is Changing in 2011
After the passage of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (2010 Tax Act) late last year, there were certain changes that will impact your take-home pay in 2011, versus what you were seeing in 2010. For starters, although the 2010 Tax Act extended the tax rates to be the same as they were in 2010, as always there are increases in the tax tables which have a minor impact on your take-home pay. Typically, this change will increase your tax withheld, reducing your take-home pay. The 2010 Tax Act also included a provision to reduce the withholding requirement for Social Security from 6.2% to 4.2%, which will have the effect of increasing your take-home pay by 2%. One other change to your paycheck came about because of a provision that was not included to be extended as a part of the 2010 Tax Act […]
Share, tweet, print, email, like or pin this post:
The Making Work Pay Credit
Many (or most) working taxpayers will be eligible to receive a special credit on their 2010 tax return, called the Making Work Pay Credit. The IRS has recently produced their Tax Tip 2011-15 which explains five important provisions about the Making Work Pay Credit: The Making Work Pay Credit provides a refundable tax credit of up to $400 for individuals and up to $800 for married taxpayers filing joint returns. Most workers received the benefit of the Making Work Pay Credit through larger paychecks, reflecting reduced federal income tax withholding during 2010. Taxpayers who file Form 1040 or 1040A will use Schedule M to figure the Making Work Pay Tax Credit. Completing Schedule M will help taxpayers determine whether they have already received the full credit in their paycheck or are due more money as a result of the credit. Taxpayers who file Form 1040-EZ should use the worksheet for […]
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”.