Mike's weekly post usually concentrated on tax saving strategies.
What every spouse should know before signing a joint return
The advantage of filing a joint tax return is well known - you generally save money compared to filing separately. However, there is at least one potential disadvantage. Both spouses are jointly and severally liable for the entire income tax bill, including interest and penalties, even if one earned most or all the income.
Roth IRAs: A smart tax idea for children
Persuading your working children to make retirement contributions may not be easy, but investments in Roth IRAs may be the wisest possible use of their earnings. The nature of Roth IRAs, coupled with the effects of long-term compounding, can create exceptional returns on such early investments.
Create a road map to retirement
Preparing for your retirement is a journey. And like most journeys, success or failure often hinges on decisions made early in the trip. Consider some of these pointers as you develop your personal road map to retirement.
Understand the pros and cons of DRIPs
Appropriately enough, investors may notice a slow trickle in earnings from "dividend reinvestment plans" (DRIPs). But these investments may end up providing a steady stream of income over the long run.
The concept is relatively simple. More than 1,000 companies and closed-end mutual funds around the country offer DRIPs to their shareholders. These programs enable shareholders to purchase stock directly from the company by automatically reinvesting dividends in additional shares. Many DRIPs also allow you to voluntarily make cash payments directly into the plan to buy even more shares.
Your 401(k) and a job change
If you change jobs this year, don't forget about your 401(k) in your old employer's retirement plan. You may be tempted to...
IRS TAX AUDITS CUT BY BUDGET ISSUES
The IRS reports that its enforcement budget has been cut by $254 million, a 5% reduction from the previous year. As a result...
New myRA program now available
A new simplified Roth IRA is the newest retirement plan. The account is called a myRA (short for "my retirement account"). It's funded by...
20 million qualify for ACA penalty exemption
According to a Brookings Institution paper on the Affordable Care Act, an estimated 20 million taxpayers who had no health insurance in 2014 will...
For effective tax planning, do a midyear review
With summer vacations and warm weather just around the corner, tax planning may not be a priority on your agenda. The problem is that if you wait until December, you cut the time for planning strategies to take effect. But if you take the time to plan now, you still have eight months for your actions to make a difference on your 2015 tax return.
There are big moments in everyone’s life. A new birth is one of them. The irony is that most life events also have tax consequences attached to them. When a new member is added to your family or someone you know, here are some tips to consider.
Are you able to benefit from an ABLE account?
a Better Life Experience Act" (also called the ABLE Act). This law provides for tax-exempt accounts that can help you or a family member with disabilities pay for qualified expenses related to the disability. These "ABLE accounts" are exempt from income tax although contributions to an account are not deductible on your federal income tax return. ABLE accounts are generally not means tested and some can provide limited bankruptcy protection.
The Foreign Bank and Financial Report (FBAR) is a reporting requirement that is getting lots of attention from the IRS. Here is what you need to know.
Do you have any foreign bank accounts or assets held outside the United States?
Are you a beneficiary of, or a responsible party for someone else who has assets held in non-United States based accounts?
Tips for the Month - April
1. Taking the standard tax deduction is convenient, but always compare it to itemized deductions and use the option with the best tax results.
2. The federal standard deduction for 2014 is $6,200 if single, $12,400 if married and joint filing, or $9,100 for head of household.
3. To substantiate a charitable contribution, you must get a written acknowledgement from the charity for all contributions of $250 or more.
Summertime is often a time for moving. The kids are out of school and new opportunities await. Don’t forget that your move might be tax deductible. Here are some hints to ensure you do not forget this valuable tax deduction.
To have moving expenses qualify as a tax deduction your move must be closely related to your new job.
Use your income tax refund wisely
To many people, an income tax refund might be one of the largest single cash receipts for the entire year. Avoid the temptation to spend your refund on consumption items.
There are several places you can invest the refund to enhance your long-term financial goals. You can pay off current debt, invest in the stock market, make home
improvements, or invest in a pension plan for retirement.
In a recent review of IRS practices, The Treasury Inspector General of Tax Administration (TIGTA) released a new report on the problem of excess contributions into IRA accounts. The report recommends better taxpayer education and:
“Identifying a more complete and accurate universe of individuals who potentially made excess contributions from which to select potentially productive cases.”
“Potentially productive cases” means selection for an IRS audit. Given this renewed focus on the problem of contributing too much into IRAs, here is what you need to know...
One of the best audit tips available can be summed up in one simple word. Match.
Spend a minute or two pretending you work for the IRS. What would you do to identify tax returns worth auditing? If you suggest matching filed tax returns with the information provided to you about that taxpayer from other sources you would be right on the mark. The IRS runs an automated matching program that kicks out mismatches and helps identify audit targets without much effort on their part. Knowing this:
Your Home. A Bundle of Tax Benefits.
There are many tax benefits built into home ownership. Here is a review of the most common. It may be worth a quick check to ensure you are maximizing your home ownership tax benefits.
Interest deductibility. Mortgage interest is one of the few allowed deductible interest expenses. It is limited to the first $1 million dollars in loans secured by your primary residence. Bonus: You can also deduct interest on a second home (cabin).
Can a business grow too fast?
Most businesses hope to grow. They consider themselves successful if growth is taking place, and the faster the growth the better. Can too much business growth be bad for a company? It can be if the growth is not adequately planned.
For example, an established company that doubles its sales volume in a year may find itself strapped for cash, for working space, and for trained personnel.
All too often when you sell an investment there are errors made in recording the taxable gain or loss on the transaction. Here are some ideas to ensure your tax bite is accurate.
Keep good cost documentation. Brokerage firms are now required to keep track of the cost of your purchases and report them to you and the IRS when you sell. Unfortunately, they are not always accurate. The only way to ensure accuracy is to keep personal records of how much an investment cost. Then you can double-check the accuracy of any Form 1099 received.
