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Reasonable Care and RMD

2015-06-15 by Eva Rosenberg

Image from page 190 of "Bell telephone magazine" (1922)Today TaxMama® hears from Sonia in the TaxQuips Forum, who has this quickie question. “I contacted the custodian of my IRA AT 3 PM on 12/31 to request a required minimum distribution (RMD). The transaction ended up being dated 1/1. Will the 50% penalty apply? If so, how can I apply for relief?”

Dear Sonia,

There IS a way to get penalty relief on RMDs, IF reasonable steps were taken to take the required minimum distribution.

Calling the custodian at 3 pm on New Year’s Eve, when most people have already left for the holiday, and expecting the transaction to be done that day is, well…not exactly reasonable.

But you can certainly request penalty relief. And if this is the first error or the first RMD, you are apt to get the penalty waived. Mike Reed, EA confirms that he gets these penalties waived regularly.

Please follow this procedure, which is explained on the IRS RMD FAQs. The worst they can do is to say, “No.” Be sure to explain why the request was made at the last minute.

Did you not know about this responsibility until then? And how did you suddenly find out? Why will this never happen again?

And folks, any time you have deadline-based transactions, perform them at least a week early. Not at the last minute. Especially if you must rely on someone else to process the transaction for you. Otherwise, not only will there be penalties; but missing the deadline may make it impossible for you to get the relief or results you wanted to achieve.
And remember, you can find answers to all kinds of questions about IRS penalties and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]

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Vacation Home Mortgage

2015-04-27 by Eva Rosenberg

Reverse MortgageToday TaxMama® hears from LFloom in the TaxQuips Forum with a very good question.

We want to buy a vacation home that will eventually be a retirement home. It is difficult and more expensive to get a loan on this place. So, I want to get a mortgage on my primary home to buy the second home. Will the interest be tax deductible?

Dear LFloom,

That is an excellent question. And I am so glad that you asked this before going forward.

You would think this would be straightforward. The loan is really meant for the new residence, so why should you have any problem with the deduction?

Unfortunately, the way the current tax laws are written, your mortgage interest deduction, essentially works like this:

You get to deduct all the interest on the mortgage to buy or to improve/repair your personal residence or one second residence (acquisition debt). The limit on the amount of the loan is $1 million.

Plus you get to deduct the interest on another $100,000 worth of debt secured by one of your homes.

Since the loan you will taking out will be on your personal residence, and it will not be secured by the vacation home, you are limited to deducting the interest on only $100,000 of debt.

To get some ideas on how to make this work, please log into the TaxQuips Forum .

And remember, you can find answers to all kinds of questions about mortgage interest and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

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Tax Season Blues

2015-04-15 by Eva Rosenberg

http://www.taxmama.com/art/main/busy.gifToday TaxMama® just wants to bring up a little lightness of being. Today is the day to pay last year’s taxes with the extension; estimated taxes for this year, and the final IRA contribution to reduce last year’s taxes a bit. So…it’s time to sing the blues.

 

 

 

The Post-Tax Filing Blues


I finally filed my tax return.

Through sleepless nights, how my eyes burn.

I dug and searched before I filed.

But let me tell you, I am riled.

I work too hard and pay a ton.

But, hey,…for now, my tax return’s done.

…. is yours?


 

© Eva Rosenberg 2004
And remember, you can find answers to all kinds of questions about paying taxes and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]

Please post all Comments and Replies in the new TaxQuips Forum .

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Collecting Social Security Early

2015-04-10 by Eva Rosenberg

Social Security CardToday TaxMama® hears from Thom in the TaxQuips Forum with a question I used to wonder about. “I started collecting Social Security benefits at 62. I just started working a few hours a week part time. Why are they still deducting SS from my paycheck, since I am collecting benefits?”

 

Dear Thom,

As long as you work, or have a business with a profit, you will be paying into the Social Security system for the rest of your life. That’s how they add funds to pay people who are collecting.

The good news is, if you start earning more than you ever did before, your benefits could increase.

The bad news is, you are under age 66 and you are collecting Social Security early. If you earn more than the annual allowable limit, (2015 is $15,720) you will have to pay back some or all of your SS benefits.

Watch your earnings carefully so you don’t have to repay your benefits – or stop receiving them until you are no longer collecting early.

Sorry about that. Your Congressfolk write these laws.

And remember, you can find answers to all kinds of questions about paying into Social Security and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]

Please post all Comments and Replies in the new TaxQuips Forum .

Download the MP3 (0:00min, 2MB) or listen now...

Ask TaxMama
Where Taxes are Fun
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Oops Got Another 1099, W-2, etc

2015-03-18 by Eva Rosenberg

yet another mistakeToday TaxMama® hears from various folks in the TaxQuips Forum and elsewhere with another common problem. “I filed my tax return and then got another W-2, 1099, or a corrected 1099 from my brokers. What should I do now?”

Dear Friends,

I get lots of questions from folks who leave something off a tax return, then realize it immediately afterwards.

Don’t panic.

Here’s what you do:

Wait about a week or so for the federal return to process. If you have a refund coming – when you receive the refund, you know the IRS is done with your return. Then go ahead and amend your Form 1040. Print out the revised form, not just the 1040X (for your files and to go with the state returns).

For people who have state tax returns that are affected, do the same thing if you have already filed it.

If you haven’t yet filed the state return or multiple state returns, use the amended 1040 (not the 1040X) as your starting point and companion to your state return(s).

See how simple that is?

And remember, you can find answers to all kinds of questions about filing errors and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]

Please post all Comments and Replies in the new TaxQuips Forum .

Download the MP3 (0:00min, 2MB) or listen now...

Ask TaxMama
Where Taxes are Fun
TaxQuips
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TaxQuips Forum
Where you can you ask your tax questions
TaxQuips Forum
Where you can you can add your comments



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