We would like to welcome you to the Yanari Watson McGaughey P.C. e-YWMnews and e-YWMalert mailing lists, the newest additions in our ongoing effort to provide you the highest quality professional service and guidance. These mailing lists will operate as follows:
• e-YWMnews-This email will be sent at least monthly to alert you to the new
articles available at our website.
• e-YWMalert-We will be sending this email to keep you abreast of cutting edge
tax news and legislation as it unfolds.
To ensure you receive these important announcements please add us as an approved sender.
This month we'd like to make sure you are aware of the many resources we have available on our website, www.ywmcpa.com, which is designed to provide helpful resources to aid you in making smart financial decisions throughout the year and to keep you abreast of important tax changes. We will notify you at least monthly when new tax and financial articles are posted to our site. Additionally, on an as needed basis we will be providing you with information on new tax legislation that may affect you and your business.
The website is comprised of multiple sections each created in an effort to provide you with relevant tools and resources to assist you in many types of financial decisions:
• Newsletter section-This is updated on a monthly basis with links to relevant
tax headlines. This month our articles include:
1. 2010 Health Care Reform Act
2. The Small Business Jobs Act of 2010
3. 2010 year-end tax planning
4. FAQ on what the income tax rate will be in 2011
5. How to use the new Roth rollover opportunity within a 401k plan
6. October 2010 tax compliance calendar
• Financial Tools section- In this section we have a number of interactive
financial calculators to assist you in making a wide variety of financial
decisions. For example there are calculators available to help you make
personal budget decision, evaluate whether refinancing makes sense in your
individual situation, to assess the best method of financing and paying for a
new car, and to determine the best retirement plan for you. This is just a
small sample of the many calculators available.
• Links-We have gathered many links to external financial Websites that may be of
interest to you. Here we have links to several financial, governmental, tax and
news websites that we hope you will find useful. Additionally we have a link to
the "Gross Prophet", YWM's blog, which will contain an archive of all e-YWMnews
and e-YWMalerts for future reference.
As always, if you have any questions or comments to make our site even better, please don't hesitate to contact us. All information on our website is generic, to determine how this affects your specific situation please give us a call.
Yanari Watson McGaughey P.C.
Showing posts with label tax. Show all posts
Showing posts with label tax. Show all posts
Tuesday, October 5, 2010
Monday, September 27, 2010
e-YWM Alert #1-2010 Small Business Jobs Act
e-YWM ALERT #1-2010 Small Business Jobs Act
We would like to welcome you to the Yanari Watson McGaughey P.C. e-YWM News and e-YWM Alert mailing lists, the newest additions in our ongoing effort to provide you the highest quality professional service and guidance. These mailing lists will operate as follows:
·e-YWM News-This email will be sent at least monthly to alert you to the new articles available at our website.
·e-YWM Alert-We will be sending this email to keep you abreast of cutting edge tax news and legislation as it unfolds.
To ensure you receive these important announcements please add us as an approved sender.
In our continuing effort to keep you informed on new legislation that may affect you and your business, we want to provide this summary of the 2010 Small Business Jobs Act which was signed into law on September 27, 2010.
The recently enacted 2010 Small Business Jobs Act includes a wide-ranging assortment of tax breaks and incentives for small business, paid for with various revenue raisers. Here's a brief overview of the tax changes in the new law.
Tax breaks and incentives
Enhanced small business expensing (Section 179 expensing). In order to help small businesses quickly recover the cost of certain capital expenses, small business taxpayers can elect to write off the cost of these expenses in the year of acquisition in lieu of recovering these costs over time through depreciation. Under pre-2010 Small Business Jobs Act law, taxpayers could expense up to $250,000 of qualifying property-generally, machinery, equipment and certain software-placed in service in tax years beginning in 2010. This annual expensing limit was reduced (but not below zero) by the amount by which the cost of qualifying property placed in service in tax years beginning in 2010 exceeded $800,000 (the investment ceiling). Under the new law, for tax years beginning in 2010 and 2011, the $250,000 limit is increased to $500,000 and the investment ceiling to $2,000,000.
The new law also makes certain real property eligible for expensing. For property placed in service in any tax year beginning in 2010 or 2011, the up-to-$500,000 of property expensed can include up to $250,000 of qualified real property (qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property).
100% exclusion of gain from the sale of small business stock for qualifying stock acquired after date of enactment and before Jan. 1, 2011. Before the 2009 Recovery Act, individuals could exclude 50% of their gain on the sale of qualified small business stock (QSBS) held for at least five years (60% for certain empowerment zone businesses). To qualify, QSBS must meet a number of conditions (e.g., it must be stock of a corporation that has gross assets that don't exceed $50 million, and the corporation must meet active business requirements). Under the 2009 Recovery Act, the percentage exclusion for gain on QSBS sold by an individual was increased to 75% for stock acquired after Feb. 17, 2009 and before Jan. 1, 2011. Under the new law, the amount of the exclusion is temporarily increased yet again, to 100% of the gain from the sale of qualifying small business stock that is acquired in 2010 after date of enactment and held for more than five years. In addition, the new law eliminates the alternative minimum tax (AMT) preference item attributable for that sale.
General business credits of eligible small businesses for 2010 allowed to be carried back five years. Generally, a business's unused general business credits can be carried back to offset taxes paid in the previous year, and the remaining amount can be carried forward for 20 years to offset future tax liabilities. Under the new law, for the first tax year of the taxpayer beginning in 2010, eligible small businesses can carry back unused general business credits for five years. Eligible small businesses consist of sole proprietorships, partnerships and non-publicly traded corporations with $50 million or less in average annual gross receipts for the prior three years.
General business credits of eligible small businesses in 2010 aren't subject to AMT. Under the AMT, taxpayers can generally only claim allowable general business credits against their regular tax liability, and only to the extent that their regular tax liability exceeds their AMT liability. A few credits, such as the credit for small business employee health insurance expenses, can be used to offset AMT liability. The new law allows eligible small businesses, as defined above, to use all types of general business credits to offset their AMT in tax years beginning in 2010.
S corporation holding period. Generally, a C corporation converting to an S corporation must hold onto any appreciated assets for 10 years following its conversion or face a business-level tax imposed on the built-in gain at the highest corporate rate of 35%. This holding period is reduced where the 7th tax year in the holding period preceded the tax year beginning in 2009 or 2010. The 2010 Small Business Jobs Act temporarily shortens the holding period of assets subject to the built-in gains tax to 5 years if the 5th tax year in the holding period precedes the tax year beginning in 2011.
Extension of 50% bonus first-year depreciation. Businesses are allowed to deduct the cost of capital expenditures over time according to depreciation schedules. In previous legislation, Congress allowed businesses to more rapidly deduct capital expenditures of most new tangible personal property, and certain other new property, placed in service in 2008 or 2009 (2010 for certain property), by permitting the first-year write-off of 50% of the cost. The new law extends the first-year 50% write-off to apply to qualifying property placed in service in 2010 (2011 for certain property).
Special rule for long-term contract accounting. The new law provides that in determining the percentage of completion under the percentage of completion method of accounting, bonus depreciation is not taken into account as a cost. This prevents the bonus depreciation from having the effect of accelerating income.
Boosted deduction for start-up expenditures. The new law allows taxpayers to deduct up to $10,000 in trade or business start-up expenditures for 2010. The amount that a business can deduct is reduced by the amount by which startup expenditures exceed $60,000. Previously, the limit of these deductions was capped at $5,000, subject to a $50,000 phase-out threshold.
Limitation on penalty for failure to disclose certain reportable transactions (including listed transactions) on a return. The new law limits the penalty to 75% of the decrease in tax resulting from the transaction. The minimum penalty is $10,000 for corporations and $5,000 for individuals (for failure to report a listed transaction, the maximum penalty is $200,000 and $100,000, respectively). These changes are retroactively effective to penalties assessed after Dec. 31, 2006.
Deductibility of health insurance for the purpose of calculating self-employment tax. The new law allows business owners to deduct the cost of health insurance incurred in 2010 for themselves and their family members in calculating their 2010 self-employment tax.
Cell phones removed from listed property category. This means that cell phones can be deducted or depreciated like other business property, without onerous recordkeeping requirements.
Offsets (revenue raisers)
Information reporting required for rental property expense payments. For payments made after Dec. 31, 2010, the new law requires persons receiving rental income from real property to file information returns with IRS and service providers reporting payments of $600 or more during the tax year for rental property expenses. Exceptions are provided for individuals renting their principal residences on a temporary basis (including active members of the military), taxpayers whose rental income doesn't exceed an IRS-determined minimal amount, and those for whom the reporting requirement would create a hardship (under IRS regs).
Increased information return penalties (effective for information returns required to be filed after Dec. 31, 2010).
Application of continuous levy to tax liabilities of certain federal contractors. For levies issued after date of enactment, the new law allows IRS to issue levies before a collection due process (CDP) hearing on Federal tax liabilities of Federal contractors (taxpayers would have an opportunity for a CDP hearing within a reasonable time after a levy is issued).
Allow participants in governmental 457 plans to treat elective deferrals as Roth contributions. For tax years beginning after Dec. 31, 2010, the new law will allow retirement savings plans sponsored by state and local governments (governmental 457(b) plans) to include designated Roth accounts. Contributions to Roth accounts are made on an after-tax basis, but distributions of both principal and earnings are generally tax-free.
Allow rollovers from elective deferral plans to designated Roth accounts. The new law allows 401(k), 403(b), and governmental 457(b) plans to permit participants to roll their pre-tax account balances into a designated Roth account. The amount of the rollover will be includible in taxable income except to the extent it is the return of after-tax contributions. If the rollover is made in 2010, the participant can elect to pay the tax in 2011 and 2012. Plans will be able to allow these rollovers immediately as of date of enactment.
Crude tall oil (a waste by-product of the paper manufacturing process) is excluded from eligibility for the cellulosic biofuel producer credit. The new law limits eligibility for the tax credit to fuels that are not highly corrosive (i.e., with an acid number of 25 or less), effective for fuels sold or used after Dec. 31, 2009.
Nonqualified annuity contracts. The new law permits holders of nonqualified annuities (annuity contracts held outside of a qualified retirement plan or IRA) to elect to receive part of the contract in the form of a stream of annuity payments, leaving the remainder of the contract to accumulate income on a tax-deferred basis.
Guarantee fees. Amounts received directly or indirectly for guarantees of indebtedness of a U.S. payor issued after date of enactment are sourced, like interest, in the U.S. As a result, amounts paid by U.S. taxpayers to foreign persons will generally be subject to U.S. withholding tax.
Please keep in mind that we've described only the highlights of the most important changes in the new law. In the coming weeks we will provide you with a more in depth look at the major provisions listed above. All information presented above is generic, if you would like to know how this affects your specific situation please give us a call. Additional resources are always available at our website, www.ywmcpa.com.
We would like to welcome you to the Yanari Watson McGaughey P.C. e-YWM News and e-YWM Alert mailing lists, the newest additions in our ongoing effort to provide you the highest quality professional service and guidance. These mailing lists will operate as follows:
·e-YWM News-This email will be sent at least monthly to alert you to the new articles available at our website.
·e-YWM Alert-We will be sending this email to keep you abreast of cutting edge tax news and legislation as it unfolds.
To ensure you receive these important announcements please add us as an approved sender.
In our continuing effort to keep you informed on new legislation that may affect you and your business, we want to provide this summary of the 2010 Small Business Jobs Act which was signed into law on September 27, 2010.
The recently enacted 2010 Small Business Jobs Act includes a wide-ranging assortment of tax breaks and incentives for small business, paid for with various revenue raisers. Here's a brief overview of the tax changes in the new law.
Tax breaks and incentives
Enhanced small business expensing (Section 179 expensing). In order to help small businesses quickly recover the cost of certain capital expenses, small business taxpayers can elect to write off the cost of these expenses in the year of acquisition in lieu of recovering these costs over time through depreciation. Under pre-2010 Small Business Jobs Act law, taxpayers could expense up to $250,000 of qualifying property-generally, machinery, equipment and certain software-placed in service in tax years beginning in 2010. This annual expensing limit was reduced (but not below zero) by the amount by which the cost of qualifying property placed in service in tax years beginning in 2010 exceeded $800,000 (the investment ceiling). Under the new law, for tax years beginning in 2010 and 2011, the $250,000 limit is increased to $500,000 and the investment ceiling to $2,000,000.
The new law also makes certain real property eligible for expensing. For property placed in service in any tax year beginning in 2010 or 2011, the up-to-$500,000 of property expensed can include up to $250,000 of qualified real property (qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property).
100% exclusion of gain from the sale of small business stock for qualifying stock acquired after date of enactment and before Jan. 1, 2011. Before the 2009 Recovery Act, individuals could exclude 50% of their gain on the sale of qualified small business stock (QSBS) held for at least five years (60% for certain empowerment zone businesses). To qualify, QSBS must meet a number of conditions (e.g., it must be stock of a corporation that has gross assets that don't exceed $50 million, and the corporation must meet active business requirements). Under the 2009 Recovery Act, the percentage exclusion for gain on QSBS sold by an individual was increased to 75% for stock acquired after Feb. 17, 2009 and before Jan. 1, 2011. Under the new law, the amount of the exclusion is temporarily increased yet again, to 100% of the gain from the sale of qualifying small business stock that is acquired in 2010 after date of enactment and held for more than five years. In addition, the new law eliminates the alternative minimum tax (AMT) preference item attributable for that sale.
General business credits of eligible small businesses for 2010 allowed to be carried back five years. Generally, a business's unused general business credits can be carried back to offset taxes paid in the previous year, and the remaining amount can be carried forward for 20 years to offset future tax liabilities. Under the new law, for the first tax year of the taxpayer beginning in 2010, eligible small businesses can carry back unused general business credits for five years. Eligible small businesses consist of sole proprietorships, partnerships and non-publicly traded corporations with $50 million or less in average annual gross receipts for the prior three years.
General business credits of eligible small businesses in 2010 aren't subject to AMT. Under the AMT, taxpayers can generally only claim allowable general business credits against their regular tax liability, and only to the extent that their regular tax liability exceeds their AMT liability. A few credits, such as the credit for small business employee health insurance expenses, can be used to offset AMT liability. The new law allows eligible small businesses, as defined above, to use all types of general business credits to offset their AMT in tax years beginning in 2010.
S corporation holding period. Generally, a C corporation converting to an S corporation must hold onto any appreciated assets for 10 years following its conversion or face a business-level tax imposed on the built-in gain at the highest corporate rate of 35%. This holding period is reduced where the 7th tax year in the holding period preceded the tax year beginning in 2009 or 2010. The 2010 Small Business Jobs Act temporarily shortens the holding period of assets subject to the built-in gains tax to 5 years if the 5th tax year in the holding period precedes the tax year beginning in 2011.
Extension of 50% bonus first-year depreciation. Businesses are allowed to deduct the cost of capital expenditures over time according to depreciation schedules. In previous legislation, Congress allowed businesses to more rapidly deduct capital expenditures of most new tangible personal property, and certain other new property, placed in service in 2008 or 2009 (2010 for certain property), by permitting the first-year write-off of 50% of the cost. The new law extends the first-year 50% write-off to apply to qualifying property placed in service in 2010 (2011 for certain property).
Special rule for long-term contract accounting. The new law provides that in determining the percentage of completion under the percentage of completion method of accounting, bonus depreciation is not taken into account as a cost. This prevents the bonus depreciation from having the effect of accelerating income.
Boosted deduction for start-up expenditures. The new law allows taxpayers to deduct up to $10,000 in trade or business start-up expenditures for 2010. The amount that a business can deduct is reduced by the amount by which startup expenditures exceed $60,000. Previously, the limit of these deductions was capped at $5,000, subject to a $50,000 phase-out threshold.
Limitation on penalty for failure to disclose certain reportable transactions (including listed transactions) on a return. The new law limits the penalty to 75% of the decrease in tax resulting from the transaction. The minimum penalty is $10,000 for corporations and $5,000 for individuals (for failure to report a listed transaction, the maximum penalty is $200,000 and $100,000, respectively). These changes are retroactively effective to penalties assessed after Dec. 31, 2006.
Deductibility of health insurance for the purpose of calculating self-employment tax. The new law allows business owners to deduct the cost of health insurance incurred in 2010 for themselves and their family members in calculating their 2010 self-employment tax.
Cell phones removed from listed property category. This means that cell phones can be deducted or depreciated like other business property, without onerous recordkeeping requirements.
Offsets (revenue raisers)
Information reporting required for rental property expense payments. For payments made after Dec. 31, 2010, the new law requires persons receiving rental income from real property to file information returns with IRS and service providers reporting payments of $600 or more during the tax year for rental property expenses. Exceptions are provided for individuals renting their principal residences on a temporary basis (including active members of the military), taxpayers whose rental income doesn't exceed an IRS-determined minimal amount, and those for whom the reporting requirement would create a hardship (under IRS regs).
Increased information return penalties (effective for information returns required to be filed after Dec. 31, 2010).
Application of continuous levy to tax liabilities of certain federal contractors. For levies issued after date of enactment, the new law allows IRS to issue levies before a collection due process (CDP) hearing on Federal tax liabilities of Federal contractors (taxpayers would have an opportunity for a CDP hearing within a reasonable time after a levy is issued).
Allow participants in governmental 457 plans to treat elective deferrals as Roth contributions. For tax years beginning after Dec. 31, 2010, the new law will allow retirement savings plans sponsored by state and local governments (governmental 457(b) plans) to include designated Roth accounts. Contributions to Roth accounts are made on an after-tax basis, but distributions of both principal and earnings are generally tax-free.
Allow rollovers from elective deferral plans to designated Roth accounts. The new law allows 401(k), 403(b), and governmental 457(b) plans to permit participants to roll their pre-tax account balances into a designated Roth account. The amount of the rollover will be includible in taxable income except to the extent it is the return of after-tax contributions. If the rollover is made in 2010, the participant can elect to pay the tax in 2011 and 2012. Plans will be able to allow these rollovers immediately as of date of enactment.
Crude tall oil (a waste by-product of the paper manufacturing process) is excluded from eligibility for the cellulosic biofuel producer credit. The new law limits eligibility for the tax credit to fuels that are not highly corrosive (i.e., with an acid number of 25 or less), effective for fuels sold or used after Dec. 31, 2009.
Nonqualified annuity contracts. The new law permits holders of nonqualified annuities (annuity contracts held outside of a qualified retirement plan or IRA) to elect to receive part of the contract in the form of a stream of annuity payments, leaving the remainder of the contract to accumulate income on a tax-deferred basis.
Guarantee fees. Amounts received directly or indirectly for guarantees of indebtedness of a U.S. payor issued after date of enactment are sourced, like interest, in the U.S. As a result, amounts paid by U.S. taxpayers to foreign persons will generally be subject to U.S. withholding tax.
Please keep in mind that we've described only the highlights of the most important changes in the new law. In the coming weeks we will provide you with a more in depth look at the major provisions listed above. All information presented above is generic, if you would like to know how this affects your specific situation please give us a call. Additional resources are always available at our website, www.ywmcpa.com.
Friday, April 23, 2010
Home is where the deduction is
For many of us, the home office deduction is something we've heard plenty about, but may not be entirely comfortable with. In the current economy, many taxpayers may have begun business endeavors that are entirely home based. For these courageous individuals we present the following:
While this article is a few years old, it covers the basics of the deduction pretty well:
http://money.cnn.com/2006/02/07/pf/taxes/home_office_deductions/
The below link addressed a few of the misconceptions regarding the home office deduction as well as the more specific requirements related to claiming it:
http://turbotax.intuit.com/tax-tools/tax-tips/small-business/5663.html
Due to the perceived audit risk and the somewhat complex rules, many eligible taxpayers have passed on the deduction. The below discusses the decision to claim the deduction:
http://www.forbes.com/2007/02/06/business-irs-deduction-ent-law-cx_ng_0206smallbizresource.html
And lastly, one more article regarding the decision to claim the deduction. This one however provides a few examples of the types of records being kept by taxpayers that claim the deduction if an audit does become an issue:
http://online.wsj.com/article/SB120043915626692441.html
With many taxpayers looking for ways to save some money, the home office deduction may be a great place to look for those that qualify. If you have any questions regarding the qualifications we would be happy to help.
While this article is a few years old, it covers the basics of the deduction pretty well:
http://money.cnn.com/2006/02/07/pf/taxes/home_office_deductions/
The below link addressed a few of the misconceptions regarding the home office deduction as well as the more specific requirements related to claiming it:
http://turbotax.intuit.com/tax-tools/tax-tips/small-business/5663.html
Due to the perceived audit risk and the somewhat complex rules, many eligible taxpayers have passed on the deduction. The below discusses the decision to claim the deduction:
http://www.forbes.com/2007/02/06/business-irs-deduction-ent-law-cx_ng_0206smallbizresource.html
And lastly, one more article regarding the decision to claim the deduction. This one however provides a few examples of the types of records being kept by taxpayers that claim the deduction if an audit does become an issue:
http://online.wsj.com/article/SB120043915626692441.html
With many taxpayers looking for ways to save some money, the home office deduction may be a great place to look for those that qualify. If you have any questions regarding the qualifications we would be happy to help.
Wednesday, March 17, 2010
What the IRS can do for you
For many, the IRS is not considered to be the friendliest of government agencies. However, the IRS does provide many helpful resources, calculators, and programs to help ease the burden and remedy some of the confusion associated with the filing of a tax return. The links below represent a small sampling of the information available on the www.irs.gov site:
For those of you who have an Adjusted Gross Income of $57,000 or less in 2009 and are looking for a little tax assistance in the preparation of a basic individual tax return the IRS provides a free federal income tax preparation and electronic filing program, developed through a partnership between the IRS and the Free File Alliance LLC, a group of private sector tax software companies. The program can be found below:
http://www.irs.gov/efile/article/0,,id=118986,00.html
In order to promote retirement savings, the IRS also provides a mechanism to use your tax refund money to buy US Series Savings Bonds. For those of us who are more likely to save money we never had available to spend it may be a good option:
http://www.irs.gov/individuals/article/0,,id=217762,00.html
Below is the hub for the individual tax payer, the site provides a multitude of links to items such as current year tax updates, refund tracking, and calculators to determine eligibility for a number of 2009 credits/deductions:
http://www.irs.gov/individuals/article/0,,id=118506,00.html
Below is the small business equivalent of the link above, the site included important information regarding required filings, acceptable expenses, as well as potential credits/deductions that may be available for the small business owner or self-employed:
http://www.irs.gov/businesses/small/article/0,,id=134947,00.html
It may not combat the public perception entirely, but it is a great resource to utilize during tax season.
For those of you who have an Adjusted Gross Income of $57,000 or less in 2009 and are looking for a little tax assistance in the preparation of a basic individual tax return the IRS provides a free federal income tax preparation and electronic filing program, developed through a partnership between the IRS and the Free File Alliance LLC, a group of private sector tax software companies. The program can be found below:
http://www.irs.gov/efile/article/0,,id=118986,00.html
In order to promote retirement savings, the IRS also provides a mechanism to use your tax refund money to buy US Series Savings Bonds. For those of us who are more likely to save money we never had available to spend it may be a good option:
http://www.irs.gov/individuals/article/0,,id=217762,00.html
Below is the hub for the individual tax payer, the site provides a multitude of links to items such as current year tax updates, refund tracking, and calculators to determine eligibility for a number of 2009 credits/deductions:
http://www.irs.gov/individuals/article/0,,id=118506,00.html
Below is the small business equivalent of the link above, the site included important information regarding required filings, acceptable expenses, as well as potential credits/deductions that may be available for the small business owner or self-employed:
http://www.irs.gov/businesses/small/article/0,,id=134947,00.html
It may not combat the public perception entirely, but it is a great resource to utilize during tax season.
Wednesday, February 17, 2010
To Roth or not to Roth
Most of us have probably heard some rumblings of the new tax laws in effect for Roth IRA’s in 2010, and for good reason. The new laws open up the Roth IRA option for many taxpayers who were previously excluded due to income. While many websites claim the Roth IRA is THE best retirement option around, the reality is a number of factors can play into the determination of whether a Roth IRA is right for you. Even if a Roth IRA is the better option overall, additional considerations should be taken into account for determining whether the cost of the conversion is significant enough to deter you from making the switch. There are many different factors that should be taken into account:
This is one of the many sites sold on the Roth IRA, but it does provide a simple calculator that will give you a basic idea of which type of IRA would be more beneficial for you (this does not address the costs of conversion):
http://www.smartmoney.com/personal-finance/retirement/which-ira-is-best-7968/
This is a similar concept, but it takes into account the cost of conversion. It also provides the estimated tax you would pay as a result of the conversion (note this is a very rough estimate, but at least provides a general idea of what a conversion may cost you in taxes):
http://www.schwab.com/public/schwab/planning/retirement/iras/roth_ira/roth_ira_conversion/considerations/roth_conversion_calculator
This article is also sold on the value of the conversion, but it does provide a great overview of the specific rules related to converting a Roth IRA to a Traditional IRA:
http://finance.yahoo.com/expert/article/moneymatters/16201
Below is a discussion of some of the reasons you may decide the conversion is not for you. It addresses some specific factors that may indicate that a Roth IRA would not be the best choice for an individual:
http://moneywatch.bnet.com/retirement-planning/blog/retirement-roadmap/dont-rush-into-roth-ira-conversions/2594/
While many sites tout the benefits of the conversion, there are a number of reasons a Roth IRA conversion would not be in your best interest. The article below details some of the issues that are often overlooked when deciding whether a conversion is in their best interest:
http://www.marketwatch.com/story/12-traps-to-avoid-when-converting-to-a-roth-2010-01-21
Lastly, the article below details how a Roth IRA can be converted back to a Traditional IRA and the benefits of this ability:
http://money.cnn.com/2009/01/08/pf/expert/Roth_recharacterization.moneymag/index.htm
For many taxpayers this move might make a lot of sense, for others it may be in your best interest to stay with a Traditional IRA and spare yourself the costs of conversion. If after reading the above you are still confused, there are a number of financial professionals more than willing to provide their opinion on the topic. At the very least, this is a concept worth reviewing as the tax implications can be large and long lasting.
This is one of the many sites sold on the Roth IRA, but it does provide a simple calculator that will give you a basic idea of which type of IRA would be more beneficial for you (this does not address the costs of conversion):
http://www.smartmoney.com/personal-finance/retirement/which-ira-is-best-7968/
This is a similar concept, but it takes into account the cost of conversion. It also provides the estimated tax you would pay as a result of the conversion (note this is a very rough estimate, but at least provides a general idea of what a conversion may cost you in taxes):
http://www.schwab.com/public/schwab/planning/retirement/iras/roth_ira/roth_ira_conversion/considerations/roth_conversion_calculator
This article is also sold on the value of the conversion, but it does provide a great overview of the specific rules related to converting a Roth IRA to a Traditional IRA:
http://finance.yahoo.com/expert/article/moneymatters/16201
Below is a discussion of some of the reasons you may decide the conversion is not for you. It addresses some specific factors that may indicate that a Roth IRA would not be the best choice for an individual:
http://moneywatch.bnet.com/retirement-planning/blog/retirement-roadmap/dont-rush-into-roth-ira-conversions/2594/
While many sites tout the benefits of the conversion, there are a number of reasons a Roth IRA conversion would not be in your best interest. The article below details some of the issues that are often overlooked when deciding whether a conversion is in their best interest:
http://www.marketwatch.com/story/12-traps-to-avoid-when-converting-to-a-roth-2010-01-21
Lastly, the article below details how a Roth IRA can be converted back to a Traditional IRA and the benefits of this ability:
http://money.cnn.com/2009/01/08/pf/expert/Roth_recharacterization.moneymag/index.htm
For many taxpayers this move might make a lot of sense, for others it may be in your best interest to stay with a Traditional IRA and spare yourself the costs of conversion. If after reading the above you are still confused, there are a number of financial professionals more than willing to provide their opinion on the topic. At the very least, this is a concept worth reviewing as the tax implications can be large and long lasting.
Friday, January 29, 2010
Deductions for the down and out of work
The clichés surrounding the concept of remaining optimistic in the face of hardships are evidence of the number of ways truly difficult situations can befall any of us. I suppose they're overused because they work-but that might just be the optimistic view. Regardless, as difficult as losing a job can be, there are a few bright points on the tax front. While you may not rejoice at the ability to claim additional deductions as a result of a decline in income, there are ways to use the situation to lessen your tax burden:
We'll start with the bad news. Unemployment benefits are considered taxable income; however, a portion of benefits is excluded, this amount is detailed in the link below:
http://www.irs.gov/newsroom/article/0,,id=205633,00.html
And now for the good news (or at least the optimistic view). Many deductions are only available if they exceed a certain % of Adjusted Gross Income. For the taxpayer who experienced a significant decline in income during the current year this may open up a host of deductions that had previously been unavailable. The below article provides a host of deductions that may help the unemployed:
http://www.usatoday.com/money/perfi/columnist/block/2009-02-09-unemployed-tax-breaks_N.htm
When one job is lost another is gained, or that's the idea anyway. There is a deduction available for job hunting expenses and the article below does a great job of spelling out what qualifies:
http://online.wsj.com/article/SB10001424052970204731804574388880246070404.html
For those of you that moved for that new job, moving expenses may be deductible if certain conditions are met. This article details the qualifying tests that determine whether the expenses are deductible as well as which expenses qualify:
http://www.smartmoney.com/personal-finance/taxes/writing-off-moving-expenses-9565/
And finally, for those job hunters that either returned to or stayed in school, a number of education deductions are available for the qualified:
http://www.kiplinger.com/features/archives/2007/01/educationtaxopedia.html
The above probably isn't enough to convince the employed to run out and quit their jobs in hopes of obtaining access to these breaks, but it does provide a bit of relief for those that qualify. Maybe the clichés had something going for them after all.
We'll start with the bad news. Unemployment benefits are considered taxable income; however, a portion of benefits is excluded, this amount is detailed in the link below:
http://www.irs.gov/newsroom/article/0,,id=205633,00.html
And now for the good news (or at least the optimistic view). Many deductions are only available if they exceed a certain % of Adjusted Gross Income. For the taxpayer who experienced a significant decline in income during the current year this may open up a host of deductions that had previously been unavailable. The below article provides a host of deductions that may help the unemployed:
http://www.usatoday.com/money/perfi/columnist/block/2009-02-09-unemployed-tax-breaks_N.htm
When one job is lost another is gained, or that's the idea anyway. There is a deduction available for job hunting expenses and the article below does a great job of spelling out what qualifies:
http://online.wsj.com/article/SB10001424052970204731804574388880246070404.html
For those of you that moved for that new job, moving expenses may be deductible if certain conditions are met. This article details the qualifying tests that determine whether the expenses are deductible as well as which expenses qualify:
http://www.smartmoney.com/personal-finance/taxes/writing-off-moving-expenses-9565/
And finally, for those job hunters that either returned to or stayed in school, a number of education deductions are available for the qualified:
http://www.kiplinger.com/features/archives/2007/01/educationtaxopedia.html
The above probably isn't enough to convince the employed to run out and quit their jobs in hopes of obtaining access to these breaks, but it does provide a bit of relief for those that qualify. Maybe the clichés had something going for them after all.
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