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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...

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IRA Warnings

2016-01-19 by Eva Rosenberg

Today 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 other draws that are exempt from the early withdrawal penalty (on 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
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Happy New Year

2015-12-30 by Eva Rosenberg

Fireworks - Adelaide Skyshow 2010
Today TaxMama® wants to wish you a Happy New Year 2016 – and leave you with these snippets of fun.

 

I was thinking…

...about how the status symbol of today is those cell phones that everyone has clipped on. I can’t afford one so I’m wearing my garage door opener.

You know, I spent a fortune on deodorant before I realized that people didn’t like me anyway.

...that women should put pictures of missing husbands on beer cans.

...about old age and decided that it is when you still have something on the ball but you are just too tired to bounce it.

...about making a movie for folks my age and call it “Pumping Rust.”

I have gotten that dreaded furniture disease … that’s when your chest is falling into your drawers.

You know when people see a cat’s litter box, they always say, “Oh have you got a cat?” Just once I wanted to say, “Nope. It’s for company. Help yourself. Make yourself comfy. Take your time.”

Employment application blanks always ask who is to be notified in case of an emergency. I think you should write A Good Doctor … or 911!

Why do they put pictures of criminals up in the Post Office? What are you supposed to do, write to these men? Why don’t they just put their pictures on the postage stamps so the mailmen could look for them while they deliver the mail?

...about how people seem to read the Bible a whole lot more as they get older, then it dawned on me: they were cramming for their finals.

And remember, you can find answers to all kinds of questions about 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, 3MB) 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


Innocent Spouse Relief - Sort of

2015-12-15 by Eva Rosenberg

consumersToday TaxMama® hears from Melissa in the TaxQuips Forum. “I was granted innocent spouse relief after my divorce in 2013. Yet when I filed my taxes this year, I didn’t get my refund and received no info on why; or if it went to my ex-husband’s unpaid state (WV) taxes, that he hasn’t paid for 3 yrs on his small business. They took my refund for 2013. But I thought if I was granted innocent spouse, they couldn’t take them for 2014.”

 

Hi Melissa,

You may have been granted innocent Spouse relief from the IRS. But were you granted the same thing in WV?

If you did not file for relief with them, you are still responsible.

Try filing a claim with them on the basis of your IRS relief. Send them the IRS determination letter, along with any forms that WV uses for innocent spouses.

Until you do, the IRS simply acts as a collection agency for the state. They have no choice, if you don’t resolve it on the state level.

If you have filed for relief with the state, then call the state and ask them to return your money. Have their relief letter handy to fax over to them.

And remember, you can find answers to all kinds of questions about innocent spouse 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
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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