April 2, 2013
It’s not too late to make contributions to an IRA for 2012. You can establish and contribute to a 2012 IRA as late as April 15, 2013. If the IRA is the traditional, tax-deductible kind, you can deduct your contributions on your 2012 tax return. If you’re under age 50, the maximum contribution is $5,000; if you were 50 or older by December 31, 2012, you can contribute up to $6,000.
The “charitable IRA rollover” rule was extended through 2013, permitting taxpayers who are 70½ or older to use their IRA to donate up to $100,000 to charity. The donation must be made directly from the IRA to the charity, and it counts as part of the taxpayer’s required minimum distribution for the year.
If you turned 70½ in 2013, remember that you’re now required to take a minimum distribution from your IRA (and, unless you’re still working, from other retirement plans also) every year. If you delayed taking your first distribution last year, you have only until April 1, 2013, to take it or you’ll be subject to a 50% penalty on the amount you should have taken.
Converting a traditional IRA to a Roth IRA is still an available option for all taxpayers. Although a conversion will generate taxable income in the year you do it, later qualifying withdrawals from the Roth will be tax-free. Your conversion opportunities are not limited to just traditional IRAs. You can also convert your 401(k), 403(b), or 457 plan to a Roth.
For details or assistance on IRA matters, contact our office.
March 28, 2013
Will you be among the thousands of taxpayers who get a big tax refund this year? While most Americans happily accept their tax refund checks, smart taxpayers understand that refunds actually cost them money. Here’s why:
* The government pays no interest on refunds. Kept in your hands, those dollars could have been productive. For example, you could have invested the money or used it to pay off your debt during the year. If the money had been added to a 401(k) plan, tax would have been deferred on both the investment and its earnings. Even better, your employer might have matched all or part of your investment, adding to your retirement savings.
* Refunded cash is not available for use until actually received. Even though most taxpayers get their checks promptly, circumstances or errors can delay (or stop) a refund.
To prevent losing money on tax refunds, consider reducing your withholding or estimated tax payments. For most taxpayers, withholding must equal either the prior year’s tax or 90% of the current year’s liability. If your annual income changes little, it’s relatively easy to avoid overwithholding. You should consider filing a revised Form W-4 withholding statement with your employer if you’re having too much withheld.
For taxpayers with fluctuating income or multiple sources of income, the problem is more complex. The IRS provides a worksheet with Form W-4, but many people find the form complicated. If you’d like assistance adjusting your withholding, contact our office.
March 26, 2013
The filing status you choose when you file your 2012 tax return will affect the tax breaks you’ll qualify for, your standard deduction amount, and ultimately the amount of tax you’ll pay. Are you single, head of household, married filing jointly, or married filing separately?
Here are seven facts that will help you choose the right status.
1. Your marital status as of the last day of the year is your marital status for the entire year.
2. If you qualify for more than one status, choose the one that results in the lowest tax liability for you.
3. Single filing status is likely to be your filing choice if you are not married or you are divorced or legally separated.
4. Married individuals can file a joint return. If your spouse died during 2012, you generally may still file a joint return for 2012.
5. Married couples may file “married, filing separately” if they choose.
6. “Head of household” status is available to you if you are not married and you paid more than half the cost of maintaining a home for yourself and a child.
7. The status “qualifying widow(er) with dependent child” is available if your spouse died during 2010 or 2011 and you have a dependent child. Other conditions may apply.
March 21, 2013
If you haven’t already taken advantage of the tax incentive for energy-efficient improvements to your home, 2013 may be the year to install furnaces, windows, doors or skylights. Qualifying purchases are eligible for a federal credit which can reduce your tax liability by up to $500.
March 19, 2013
You may be a victim of identity theft and not have a clue that this has happened to you until you get a notice from the IRS telling you that –
* You filed more than one tax return, or someone has already filed using your information.
* You owe taxes for a year even though you didn’t file a return because you weren’t required to file.
* You were paid wages from an employer where you did not work.
If you get such a notice, the IRS wants you to respond immediately so that they can correct the problem and secure your tax account.
March 15, 2013
The IRS has made preventing identity theft a top priority this year.
Here’s what identity thieves have been doing: They steal a taxpayer’s personal information and use it to file a tax return claiming a refund under the taxpayer’s name. Then when the taxpayer actually files a return, the IRS won’t accept it and notifies the taxpayer that a return under his name and ID number has already been filed.
The IRS recommends that taxpayers should do the following in order to avoid becoming an identity theft victim:
* Guard your personal information. Identity thieves can get your information by stealing your wallet or purse, going through your trash, or posing as someone who needs your information for a legitimate reason.
* Watch out for IRS impersonators. Don’t fall for phone calls, faxes, e-mails, or other contacts made by people claiming to be from the IRS. Don’t respond to the message. Don’t open any attachments in an e-mail or click on any links. Do not enter your personal information.
The IRS recommends that you enter “phishing” in the search box at the top of its website (www.irs.gov) to get more information on avoiding tax scams. E-mail suspected scams to firstname.lastname@example.org.
* Protect information on your computer. Protect your tax information with a password, and once you’re finished with your tax data, take it off your hard drive.