It's Tax Season
Your W-2s, 1099s, bank & broker statements and K-1s should have started to arrive and we're now in Tax Season. Below are some useful highlights to recent changes. Contact your CPA today to help get organized. Some offer substantial Early Bird discounts (including MyNetCPA.com).
You may have sold some mutual funds or stocks, married, divorced, had (or adopted) a child, moved, attended classes, made improvements to your house, changed jobs and/or bought a home or car. Like much of life's changes, these activities affect the amount of taxes you pay. Here are a couple of thoughts about recent changes which complicate filing your taxes and planning for 2010.
Bought a home:
To take advantage of the home buyers' credits ($8,000 for 1st time buyers, $6,500 for others (if purchased after 11/6/09), subject to certain earnings limits), you'll need to -
a) File a paper return (cannot e-file)
b) Include Form 5405 with your Form 1040, and
c) Include the final settlement statement (usually a Form HUD-1). Existing homeowners claiming the credit must also provide documentation proving ownership with mortgage statements, property tax receipts or homeowner's insurance records.
Bought a car:
The Cash for Clunkers program doesn't affect your income tax filing. You should have received the credit off your purchase price from the dealership. If you did not, or have more questions about this program, check www.cars.gov (note especially the .gov). However, you may be able to deduct sales tax paid for buying a car in 2009.
Had a job:
The Making Work Pay Credit program gave a credit to most employees through lower federal income tax withholding on each paycheck in 2009. However, you must file Schedule M to claim the credit and there are numerous complications. If you had more than one job and/or received Social Security benefits in addition to having a job, your 2009 withholding may have been inappropriate for your circumstances and you may receive a lower refund (or owe more) when you file your 2009 tax return. This program continues in 2010 and will result in a slightly lower amount of take home pay in 2010 vs. 2009 because of changes in the required payroll withholding amounts.
Important: This is a refundable credit (similar to the Earned Income Credit). Even if you owe no taxes, you may still claim the credit by filing a Schedule M.
Claim the Standard Deduction:
If your potentially itemized deductions (medical, taxes, interest, casualty losses and certain other costs) are near or less than your standard deduction (increased in 2009), you may still benefit from some of these itemized deductions while still claiming the standard deduction. Real estate tax, sales or excise tax paid for a new car or certain disaster losses (reported on Form 4684) can still be claimed using Schedule L.
I am happy to assist you with these and any other tax and financial planning situations.
Contact me today:
kfolberg@mynetcpa.com
(262) 421-1170 Office
(877) 277-7151 Fax
Monday, January 25, 2010
Monday, January 11, 2010
IRAs - Roth and Traditional
We're in that time of year when you can decide to put money into an IRA and choose whether to have the money be counted as a 2009 or 2010 contribution. Here's a primer of the basic differences between contributing to a Roth or a Traditional IRA:
A. Traditional IRA contributions are tax deductible, but withdrawals are subject to ordinary income tax in the year withdrawn. There are required minimum withdrawals (RMDs) beginning at age 70 1/2.
B. Roth IRS contributions are not tax deductible, but withdrawals are tax free and there are no RMDs (unless the Roth IRA was inherited).
So, if you believe that your retirement account will grow significantly through interest, dividends and/or capital gains, you would be better off investing in a Roth IRA because of the likelihood that tax rates will be going up to pay for the recent government spending binge. It's better to pay taxes now at the lower tax rate and get your Roth earnings tax free later, even if you expect to be in a lower tax bracket when you retire.
IRAs have income and other limits as to whether and how much you can contribute and withdrawal. One of the important things to note is that most withdrawals taken before you reach the age of 59 1/2 are subject to a 10% federal income tax penalty. Many states also tack-on an additional penalty for these early withdrawals.
Don't Forget:
Another option is investing in growth stocks outside of a tax sheltered plan ('Growth Investing'). These are not tax deductible, but the gain portions of withdrawals are generally taxed only at the favorable long-term capital gains rate, which currently ranges from 0% to 15%. However, President Obama has proposed increasing long-term capital gains tax rates to 20% for taxpayers in the two highest income-tax brackets, while letting the 15% and 0% rates continue for those in lower brackets.
This type of investing is most flexible in terms of life's changing needs. You can invest and withdrawal anytime without limits or penalties, and should be a significant part of everyone's wealth and retirement planning.
What to do now:
Until April 15th, if you are eligible, consider making contributions to your IRA for 2009. Also, because you may get the benefit of increasing value throughout the year, consider making your 2010 IRA contribution now too.
I suggest consulting with a retirement plan investment professional first. Then, before taking action, review their suggestions with your CPA who will provide you with unbiased counsel regarding the suggested strategy.
Contact me:
kfolberg@mynetcpa.com
(262) 421-1170 Office
(877) 277-7151 Fax
A. Traditional IRA contributions are tax deductible, but withdrawals are subject to ordinary income tax in the year withdrawn. There are required minimum withdrawals (RMDs) beginning at age 70 1/2.
B. Roth IRS contributions are not tax deductible, but withdrawals are tax free and there are no RMDs (unless the Roth IRA was inherited).
So, if you believe that your retirement account will grow significantly through interest, dividends and/or capital gains, you would be better off investing in a Roth IRA because of the likelihood that tax rates will be going up to pay for the recent government spending binge. It's better to pay taxes now at the lower tax rate and get your Roth earnings tax free later, even if you expect to be in a lower tax bracket when you retire.
IRAs have income and other limits as to whether and how much you can contribute and withdrawal. One of the important things to note is that most withdrawals taken before you reach the age of 59 1/2 are subject to a 10% federal income tax penalty. Many states also tack-on an additional penalty for these early withdrawals.
Don't Forget:
Another option is investing in growth stocks outside of a tax sheltered plan ('Growth Investing'). These are not tax deductible, but the gain portions of withdrawals are generally taxed only at the favorable long-term capital gains rate, which currently ranges from 0% to 15%. However, President Obama has proposed increasing long-term capital gains tax rates to 20% for taxpayers in the two highest income-tax brackets, while letting the 15% and 0% rates continue for those in lower brackets.
This type of investing is most flexible in terms of life's changing needs. You can invest and withdrawal anytime without limits or penalties, and should be a significant part of everyone's wealth and retirement planning.
What to do now:
Until April 15th, if you are eligible, consider making contributions to your IRA for 2009. Also, because you may get the benefit of increasing value throughout the year, consider making your 2010 IRA contribution now too.
I suggest consulting with a retirement plan investment professional first. Then, before taking action, review their suggestions with your CPA who will provide you with unbiased counsel regarding the suggested strategy.
Contact me:
kfolberg@mynetcpa.com
(262) 421-1170 Office
(877) 277-7151 Fax
Tuesday, January 5, 2010
"Free" IRS Tax Software
You may have heard the good news: the IRS has partnered with 20 tax software companies to provide software and e-filing services for "free," if your income is below $57,000 (generally).
Hmmmm, my skeptical mind wonders (I was an auditor for 4 years so I'm a well-trained skeptic) . . .
Sounds too good to be true?
The government offering something to you for free?
What's in it for them?
What's the catch?
Well, here the REAL story:
Determining your Income is usually VERY easy - W-2's, 1099's and mutual fund/brokerage statements show us (and the IRS) how much money came IN during the year. It takes virtually NO knowledge of the tax law to report these amounts on your tax return - and pay taxes on these amounts, less the "standard" deductions and exemptions which are built into the tax forms and software. SO, if it's so easy to determine your income, where are you likely to go WRONG?
RIGHT - Which deductions, exemptions and credits are you entitled to? The tax software might make some suggestions, but it's what's NOT known that will leave you paying more taxes than you have to. Tax attorneys and CPAs with master's degrees study and practice the tax law FULL-TIME, year-'round. Why? Because it's complicated! There are many activities which affect the amount you pay in taxes, and it's the job of CPAs to help you keep the most amount of your money, not only by preparing your tax return, but by consulting with you periodically throughout the year.
My (admittedly self-serving) conclusion: Forget about using "free" things like tax software from the government. It really is too good to be true and you'll end up giving the government more of your money in taxes than if you had used an experienced, qualified CPA to prepare your tax return and to advise you on choices you can make to keep more of your money - at tax time and throughout the year.
Contact me:
kfolberg@mynetcpa.com
(262) 421-1170 Office
(877) 277-7151 Fax
Hmmmm, my skeptical mind wonders (I was an auditor for 4 years so I'm a well-trained skeptic) . . .
Sounds too good to be true?
The government offering something to you for free?
What's in it for them?
What's the catch?
Well, here the REAL story:
Determining your Income is usually VERY easy - W-2's, 1099's and mutual fund/brokerage statements show us (and the IRS) how much money came IN during the year. It takes virtually NO knowledge of the tax law to report these amounts on your tax return - and pay taxes on these amounts, less the "standard" deductions and exemptions which are built into the tax forms and software. SO, if it's so easy to determine your income, where are you likely to go WRONG?
RIGHT - Which deductions, exemptions and credits are you entitled to? The tax software might make some suggestions, but it's what's NOT known that will leave you paying more taxes than you have to. Tax attorneys and CPAs with master's degrees study and practice the tax law FULL-TIME, year-'round. Why? Because it's complicated! There are many activities which affect the amount you pay in taxes, and it's the job of CPAs to help you keep the most amount of your money, not only by preparing your tax return, but by consulting with you periodically throughout the year.
My (admittedly self-serving) conclusion: Forget about using "free" things like tax software from the government. It really is too good to be true and you'll end up giving the government more of your money in taxes than if you had used an experienced, qualified CPA to prepare your tax return and to advise you on choices you can make to keep more of your money - at tax time and throughout the year.
Contact me:
kfolberg@mynetcpa.com
(262) 421-1170 Office
(877) 277-7151 Fax
Subscribe to:
Posts (Atom)