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Tax Day Deadline - and Extensions

2016-04-18 by Eva Rosenberg

stevepb / Pixabay[/caption]

Good news! This year we get a few extra days to file our tax returns – until April 18th (19th in MA and MN).

But what’s if you’re just not ready?

Relax. File an extension – no excuses needed.
You get an extra six months to file.
Use From 4868 for personal extensions

Check with your state for their forms and filing requirements. William Perez at About.com has a good list of the state info. When you expect to owe money, some states, like CA, OK, DE and some others, will only give you an extension if you pay some or most of the balance due.

Don’t worry, going on extension won’t increase your chances of audit.

Oh, you heard it’s an extension to file, not an extension to pay?
That’s true. But they will grant you the extension even if you don’t pay the whole balance due.
By filing the extension, you avoid the non-filing penalty of 5% per month up to 25%.
AND if you really have a hardship when it comes to paying, there’s a special form to give you more time to pay – Form 1127.

For business, like partnerships, estates and gift taxes, use Form 7004 to get the extension – and the corresponding state form.

Whatever your tax problem – TaxMama has an answer – free – at www.taxmama.com click on Ask a Question.

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Wasted Refunds

2016-04-04 by Eva Rosenberg


stevepb / Pixabay

Today TaxMama® wants to bring wasted refunds to your attention. The IRS keeps sending out announcements that refunds are expiring. People keep ignoring those announcements, thinking that this doesn’t apply to them.

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Last week’s TaxWatch column at MarketWatch.com tells some stories of people who lost their refunds because…shrug, I just can’t be bothered to file right now.
Please – read that column and pass it on to your friends or family members who aren’t filing.

Let me tell you another story – about someone making close to minimum wage, who also just didn’t bother. One day, this fellow got disabled. He wasn’t in a position to collect either disability or unemployment (OK…through sheer stupidity.) But we were able to persuade him to catch up on his previously un-filed returns (there were at least 7 years unfiled). For the years that were still open, we were able to get him quick refunds of over $3000 . But…for the other years…all gone. And let me tell you, when you are unemployed, sick and have no income coming in, that lost $4000 can make a big difference! It took another 2-3 years before he was able to resolve his medical issues and start getting SSI and VA help. (Don’t ask.)

Every tax professional I know has more stories. So do I…like the doctor living in his car with his two children; or the dementia victim whose bank moved and he couldn’t pay his mortgage or file his taxes, or…folks who will break your heart.

Please, don’t be one of those statistics. Please, FILE YOUR UNFILED RETURNS! Or help someone you love catch up.

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

And Remember, if YOU have questions, please post them into the TaxQuips Forum – just click on Ask A Question. (Family members – use this.)

[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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TaxMama's Tax Quips 2016 Mileage

2016-03-21 by Eva Rosenberg

TaxMama® and Ken Jeffries interview:

Keeping good recordsLISTEN TO PODCAST

Ken: It’s TaxQuips Time from TaxMama.com . Today TaxMama covers deductible mileage.
What kinds of mileage are deductible by individuals and businesses?

TaxMama: Actually, there are four ways to take advantage of vehicle-related deductions:


  1. Medical mileage

  2. Moving Mileage

  3. Job or business mileage

  4. Charitable mileage


Ken: What are the mileage rates for 2016?

TaxMama:


  1. Medical mileage and Moving Mileage – 19 cents (down from 23 in 2015)

  2. Job or business mileage – 54 cents (down from 57.5 in 2015)

  3. Charitable mileage – it’s always 14 cents – it literally takes an Act of Congress to change it


Make sure you keep track of all your miles for the year – not just the deductible miles. Keep good records.

Ken: There’s a lot more to learn about vehicle deductions and mileage. We’ll talk about that in future TaxQuips.

Ken: Meanwhile remember, you can find answers to all kinds of questions about mileage and other tax issues, free.
Where? Where else? At www.TaxMama.com.

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First Time Homebuyer and IRAs

2016-02-23 by Eva Rosenberg

A first home?
Today TaxMama® hears from Emily in the TaxQuips Forum with an excellent question. “I’m 35 years old and taking money out of an IRA for a down payment on my house. I am not a first time homebuyer. This will be my primary residence. Should I roll my IRA into a ROTH IRA before taking the funds out? Or just take the funds straight out of the IRA? I have a separate 401k where I’m investing heavily each month.”

 

 

Dear Emily,

First of all, are you sure you’re not a first time homebuyer?

That doesn’t mean you have never owned a home. It means that you haven’t owned a home during the last 2 years. [Sec 72(t)(2)(F) ] “the 2-year period ending on the date of acquisition of the principal residence”

If you do happen to qualify, then you have a once in a lifetime “get out of penalty free” card to avoid the 10% early withdrawal penalties when you take the money from your IRA. (and the state’s penalty). You still have to pay the taxes on the $10,000 you draw – for IRS and state.

Now…the money must come from an IRA, not a 401k. So if you qualify, use the money in your IRA. Do not roll it into a Roth IRA.

However, there’s a better option. You are putting a lot of money into your 401k. If you plan to stay with this employer for the next several years – borrow the money from your 401k instead. The benefits?

a) You get the money tax-free. So you get the benefit of ALL the money. (They would withhold 20% of your IRA withdrawal before you get it.)
b) You pay yourself back at a low interest rate – so you don’t deplete your retirement account.
c) AND you can get up to $50,000 or 50% of the value of the account, whichever is lower.
d) You don’t have to worry about whether or not you qualify for the first-time homebuyer rules.

The only issue is – does your employer’s plan allow you to borrow? Most do. So find out.

Incidentally, if you have the 401k invested in securities you particularly like that will have to be sold – use the funds in your IRA to re-buy those securities so you don’t lose the earning power.

And remember, you can find answers to all kinds of questions about buying a home 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, 4MB) 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
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IRA Warnings

2016-01-19 by Eva Rosenberg

IRAToday TaxMama® hears from Jeff in the TaxQuips Forum with a very common type of problem. Let me paraphrase. “My wife had a traditional IRA at Vanguard and we rolled it over to another company where I set up the account. We didn’t notice that the account was in my name, instead of hers until we saw my name on a recent statement. What now?”

Dear Jeff and TaxMama Family,

You can read my answer to Jeff here. But I want to talk to you today about avoiding IRA problems. I hear about so many problems from people rolling over funds from one IRA to another, or from a pension plan or 401k to an IRA. Here are some common mistakes to avoid.

1) When moving money from one account to another, make sure to read the paperwork and to log into the new account to:


  1. Make sure that it IS an IRA account.

  2. Make sure the account is in the correct name – IRA’s belong to an individual – not a couple.


2) If you withdraw the money instead of making a direct transfer, be SURE to deposit the funds to an IRA before the 60 days runs out. Remember, it’s not two months – it’s 60 days.

 

3) If you plan to draw up to $10,000 to buy a home, you must understand the rules:


  1. The money must come from an IRA only – not a 401(k) or other pension plan.

  2. So if your money is not in an IRA, move it to one before your withdraw the funds.

  3. You are only exempt from the early withdrawal penalties – you must still pay tax on the money you withdraw.

  4. Even if you are married, you are only entitled to draw up to $10,000 from your own IRA. If you need more money, you must withdraw the rest from your spouse’s IRA.

  5. If your spouse doesn’t have an IRA yet, and you want to save up money for a house, consider funding a spousal IRA for a couple of years before you buy the home.


4) When it comes to all Form 5329) – the money must also be drawn from an IRA. So, again, move money from your pension plans to an IRA before taking any draws.

5) However, when you draw money during a divorce, under the terms of a QDRO – qualified domestic relations order, it MUST come directly from a qualified retirement plan, not an IRA.

And remember, you can find answers to all kinds of questions about IRAs 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, 4MB) or listen now...

Ask TaxMama
Where Taxes are Fun
TaxQuips
The #1 Free Tax Podcast Online
TaxQuips Forum
Where you can you ask your tax questions
TaxQuips Forum
Where you can you can add your comments



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