Last year there were a couple of new opportunities for doing some planning with Roth IRAs, those IRAs that allow qualified withdrawals to be free of income taxes. For one thing, virtually all folks that had a traditional IRA were allowed to convert it to a Roth IRA if they chose to. Previously, no such conversion was allowed if your income exceeded $100,000, married or single. Second, if you converted to a Roth IRA last year, you were allowed to recognize any income from the conversion over the two subsequent years, 2011 and 2012. That option is no longer available with the close of 2010. Continue Reading…
A Few Year-End Tax Reminders For 2010
As we approach the end of the year, you might be wondering if there’s anything you can do to trim your 2010 tax bill. Keep in mind that you are probably a cash basis tax payer with a calendar year end. That means any income that comes in before December 31 is taxable this year and any expenses you want to deduct will have to be paid by the same date. Let’s talk about tax loss harvesting for starters. While we’ve had a relatively good year in the market, you may have some investments in your portfolio that have losses and can generate tax savings. Continue Reading…
How Do Income Tax Cuts Affect Federal Revenues?
You are no doubt aware that we are roughly two months away from seeing the so-called “Bush tax cuts” expiring. If they expire as scheduled, income tax rates go up for practically all taxpayers. That Congress adjourned and went home to campaign without resolving this issue is quite incredible. But they did and so you and I don’t know what tax rate we’ll be paying in 60 short days. Many small businesses don’t know what rate they’ll be paying either. So companies that have seen an uptick in their sales need to hire but don’t because of tax uncertainty. Continue Reading…
On the Trail of Our Federal Tax Dollars
You probably heard the news recently that 89,000 checks for $250 each, $22 million in federal stimulus money, went to people that were either deceased or locked up in prison. If you find that somewhat disgusting, join the club. However, to put a positive spin on this, as near as I can tell there were no checks sent to any dead folks who were also incarcerated! Continue Reading…
How About an After-the-Year-End Tax Deduction?
We’re only ten days away from the 2008 tax return being due. Your taxes are due April 15 or upon nomination to a cabinet position, whichever comes first! If you haven’t filed yet, it may be because you know you are going to owe some money. It’s hard to stomach writing a check to the Treasury after you’ve paid in all year long. It’s perhaps more difficult to stomach this year, knowing that even after they get our tax money in, the federal government will need another trillion or so additional to carry out all their programs. I hope we don’t get used to pronouncing the phrase ‘trillion dollar deficits’.
Most of us are on what we call “cash basis” accounting with a calendar year end. So any income we actually receive from January 1 through December 31 in 2008 is going on the tax return. Any deductible expenses we paid during that period come off the tax return as well. If we incurred a deductible expense in December 2008 but didn’t pay it until 2009, too bad. We can use it in 2009 but not in 2008. But let’s talk about a couple of deductions you can take beyond the end of the year. Continue Reading…
If the Recovery Plan Fits, Wear It!
While you were busy wrapping up your Christmas shopping last December, Congress was busy passing yet another economic recovery bill. The Worker, Retiree and Employer Act of 2008 sounds like a sleigh full of gifts, something for just about all of us. I want to talk about one of the provisions of the Act, the suspension of required distributions from retirement accounts. This idea is not going to apply to everyone but, if it does, it may save you some taxes in 2009. Continue Reading…
When the Market Hands You Lemons, Wash Them!
If you’ve got money in the stock market, I probably don’t need to remind you that this has been a disappointing year. So far you’ve really taken a bath, but market corrections happen every so often and they’re part of the price you pay when you invest in stocks. But over the long run, investors who stay put in a diversified portfolio are generally well rewarded for investing in the market. In the meantime, there may be a way for some of you to get some benefit from your stock market losses on your tax return. Continue Reading…
Retirement 101: The Traditional IRA
No doubt many of you have been lying awake at night trying to come up with ways to spend the tax rebate you’ll receive later this year. The government wants you to spend it, of course, to stimulate the economy. I expect some folks are so happy about this windfall they may spend it two or three times with the help of credit cards. Some will think, “if I get $600 out of nowhere, I’ll buy the buy the $1,000 big screen and take a weekend trip!” Continue Reading…
Lum and Abner on Income Taxes
My wife and I recently found ourselves in the middle of downtown Pine Ridge, home of the nationally famous duo Lum and Abner. In case some of the younger folks don’t recognize the name, I should point out that they were nationally famous in the 1940s and 50s on radio. There’s a museum in Pine Ridge, a suburb of Mena, dedicated to them. Continue Reading…
Swimming With Tax Sharks
When saving for retirement, you’ll want to protect your funds from taxes to the extent possible. Picture yourself swimming across a lengthy stretch of water (your working career). At the end of the journey is an island where you live happily ever after (retirement). Think of the government as a revenue hungry great white shark standing between you and your final departure from earth. The object is to minimize the tax bite over your life. Continue Reading…