Sunday, July 31, 2011

Six Things to Know About the Expanded Adoption Tax Credit

If you are adopting a child in 2011, the Internal Revenue Service encourages you to familiarize yourself with the adoption tax credit. The Affordable Care Act increased the amount of the credit and made it refundable, which means it can increase the amount of your refund.

Here are six things to know about this valuable tax credit:
  1. The adoption tax credit, which is as much as $13,170, offsets qualified adoption expenses making adoption possible for some families who could not otherwise afford it. Taxpayers who adopt a child in 2010 or 2011 may qualify if you adopted or attempted to adopt a child and paid qualified expenses relating to the adoption.

  2. Taxpayers with modified adjusted gross income of more than $182,520 in 2010 may not qualify for the full amount and it phases out completely at $222,520. The IRS may make inflation adjustments for 2011 to this phase-out amount as well as to the maximum credit amount.

  3. You may be able to claim the credit even if the adoption does not become final. If you adopt a special needs child, you may qualify for the full amount of the adoption credit even if you paid few or no adoption-related expenses.

  4. Qualified adoption expenses are reasonable and necessary expenses directly related to the legal adoption of the child who is under 18 years old, or physically or mentally incapable of caring for himself or herself. These expenses may include adoption fees, court costs, attorney fees and travel expenses.

  5. To claim the credit, you must file a paper tax return and Form 8839, Qualified Adoption Expenses, and you must attach documents supporting the adoption. Documents may include a final adoption decree, placement agreement from an authorized agency, court documents and the state’s determination for special needs children. You can still use IRS Free File to prepare your return, but it must be printed and mailed to the IRS, along with all required documentation. Failure to include required documents will delay your refund.

  6. The IRS is committed to processing adoption credit claims quickly, but it also must safeguard against improper claims by ensuring the standards for this important credit are met. If your return is selected for review, please keep in mind that it is necessary for the IRS to ensure the legal criteria are met before the credit can be paid. If you are owed a refund beyond the adoption credit, you will still receive that part of your refund while the review is being conducted.
For more information see the Adoption Benefits FAQ page available at or the instructions to IRS Form 8839, Qualified Adoption Expenses, which can be downloaded from the website or ordered by calling 800-TAX-FORM (800-829-3676) Also call Accu-Tax at 865-984-6329

Friday, July 29, 2011

Seven Tax Tips for Job Seekers

Many taxpayers spend time during the summer months updating their résumé and attending career fairs. The Internal Revenue Service reminds job seekers that you may be able to deduct some of the expenses on your tax return.
Here are seven things the IRS wants you to know about deducting costs related to your job search.
  1. To qualify for a deduction, the expenses must be spent on a job search in your current occupation. You may not deduct expenses you incur while looking for a job in a new occupation.
  2. You can deduct employment and outplacement agency fees you pay while looking for a job in your present occupation. If your employer pays you back in a later year for employment agency fees, you must include the amount you receive in your gross income, up to the amount of your tax benefit in the earlier year.
  3. You can deduct amounts you spend for preparing and mailing copies of your résumé to prospective employers as long as you are looking for a new job in your present occupation.
  4. If you travel to an area to look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. You can only deduct the travel expenses if the trip is primarily to look for a new job. The amount of time you spend on personal activity compared to the amount of time you spend looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job.
  5. You cannot deduct job search expenses if there was a substantial break between the end of your last job and the time you begin looking for a new one.
  6. You cannot deduct job search expenses if you are looking for a job for the first time.
  7. The amount of job search expenses that you can claim on your tax return is limited. You can claim the amount that is more than 2 percent of your adjusted gross income.  You can figure your deduction on Schedule A.
For more information about job search expenses, see IRS Publication 529, Miscellaneous Deductions. This publication is available on or by calling 800-TAX-FORM (800-829-3676). Or you can give us a call at 865-984-6329

Thursday, July 28, 2011

Eight Tips for Deducting Charitable Contributions

Charitable contributions made to qualified organizations may help lower your tax bill. The IRS has put together the following eight tips to help ensure your contributions pay off on your tax return.
   1. If your goal is a legitimate tax deduction, then you must be giving to a qualified organization. Also, you cannot deduct contributions made to specific individuals, political organizations and candidates. See IRS Publication 526, Charitable Contributions, for rules on what constitutes a qualified organization.

     2. To deduct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A.

     3. If you receive a benefit because of your contribution such as merchandise, tickets to a ball game or other goods and services, then you can deduct only the amount that exceeds the fair market value of the benefit received.

     4. Donations of stock or other non-cash property are usually valued at the fair market value of the property. Clothing and household items must generally be in good used condition or better to be deductible. Special rules apply to vehicle donations.

     5. Fair market value is generally the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts.

     6. Regardless of the amount, to deduct a contribution of cash, check, or other monetary gift, you must maintain a bank record, payroll deduction records or a written communication from the organization containing the name of the organization, the date of the contribution and amount of the contribution. For text message donations, a telephone bill will meet the record-keeping requirement if it shows the name of the receiving organization, the date of the contribution, and the amount given.

     7. To claim a deduction for contributions of cash or property equaling $250 or more you must have a bank record, payroll deduction records or a written acknowledgment from the qualified organization showing the amount of the cash and a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift. One document may satisfy both the written communication requirement for monetary gifts and the written acknowledgement requirement for all contributions of $250 or more. If your total deduction for all noncash contributions for the year is over $500, you must complete and attach IRS Form 8283, Noncash Charitable Contributions, to your return.

     8. Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which generally requires an appraisal by a qualified appraiser.
For more information on charitable contributions, refer to Form 8283 and its instructions, as well as Publication 526, Charitable Contributions. For information on determining value, refer to Publication 561, Determining the Value of Donated Property. These forms and publications are available at or by calling 800-TAX-FORM (800-829-3676).

Tuesday, July 26, 2011

Comparing your taxes to your neighbors'

Admit it. You like to compare yourself to your colleagues, neighbors, even family members. It's natural to want to know just how we stack up.
Taxes depend on numerical data, making them ripe for ranking analysis. And the Internal Revenue Service even helps us by breaking out the information it collects.
The agency's Statistics of Income Division recently released data for every U.S. ZIP code for which 250 or more returns were filed between Jan. 1, 2009, and Dec. 31, 2009.  For the most part, these Form 1040, 1040A, and 1040EZ tax returns were for the 2008 tax year, although the IRS says that a "limited number" of late-filed returns for prior tax years also were sent in during that period.
So that we don't have to sort through a gigantic spreadsheet, the IRS provides the data for each state. Thanks!
Of course, I immediately headed to the Texas database to see just where my taxes fit in. I learned a good number of my neighbors make more money than the hubby and I do. But then I already  knew that based on the luxury cars parked in many neighboring driveways.
Then I got to wondering just which Texas ZIP code had the most high-income filers. In this particular IRS data breakout, that's $200,000 or more adjusted gross income.
The answer is 77479. And it is this week's By the Numbers figure.
77479 richest Texas tax returns 2008
That's the ZIP code for Sugar Land, a Houston suburb. You might not know the town by name, but if you use Imperial Sugar products, you're familiar with Sugar Land.
Three tax years ago, 4,631 returns showing an address in the sweet community reported AGI of $200,000 or more. That represents 15 percent of Sugar Land's 30,766 returns that year.
Sugar Land also also had a hefty number of taxpayers reporting adjusted income between $100,000 and $199,999. There were 7,545 returns in that income category, almost 25 percent of the returns. That income bracket was Sugar Land's largest earnings segment, both in raw numbers and percentage wise.
Another suburban Houston ZIP code, 77024 in Hunter's Creek Village, had the next largest number of $200,000 plus filers in 2008: 4,626. And 2,323 returns in that community reported AGI between $100,000 and $199,999.

One more Texas ZIP code, 75093 which covers Plano, had more than 4,000 filers in the top income bracket. Residents of this Dallas-area town had 4,014 high-income earners and almost that many, 4,010, reported income in the next lower, relatively speaking, income bracket.
Rounding out the top 10 Texas ZIP codes reporting substantial returns with more than $200,000 AGI are:
77005 with 3,896 returns
76092 with 3,848 returns
75225 with 3,635 returns
75034 with 3,561 returns
77379 with 3,150 returns
77494 with 3,070 returns
77382 with 3,000 returns
Sorry. You'll have to Google these seven ZIP codes to find out just where they are.
Even though my neighborhood didn't make the IRS high earner list, I still think it's a pretty darn nice place to live. But I will admit to wanting to break into the top tax filing bracket for my ZIP code as soon as I can.

Renting a Home to a Relative? Deserve Tax Deductions – If not an Award?

If you rent a home to a family member, your taxes could majorly be affected by your answers to three questions.
1. Do you charge rent?
If yes, go on to 2.
If not, your taxes may be simpler but you can take fewer deductions for this home. Of course you can deduct the real estate taxes and home mortgage interest (if this is a qualified second home) if you itemize your deductions. But there are no rental deductions available if you do not charge rent.
2. What is the fair rental value?
Fair rental value for a home can be learned by checking out the rent for other homes that are of the same size, location, and condition. If research reveals you are charging rent comparable to the other homes, you know this home is rented at fair rental value and you probably have a profit motive. Keep the research materials used, such as newspaper or online ads, with your other tax records.
3. Is the rent you charge fair rental value?
If yes, you must report all rental income and expenses on Schedule E (Form 1040). Your rental expenses include things such as repairs, insurance, utilities, homeowner’s association fees, and depreciation. The expenses you paid in excess of your rental income may be limited by the passive activity loss limitations, but they can carry forward for an unlimited number of years.
If not, you fall under “not rented” for profit rules. In this case, the rental income is reported on line 21 of your return as “Other Income” instead of filing Schedule E. The mortgage interest and real estate taxes paid may be deducted in full on Schedule A (Form 1040) if the rental home is a qualified second home. All other rental expenses are included on Schedule A as miscellaneous deductions if you itemize, and subject to the 2% adjusted gross income threshold. These expenses are also limited by the rental income you received this year, but the excess is not carried forward to next year.

Monday, July 25, 2011

Two-Year Limit No Longer Applies to Many Innocent Spouse Requests

IR-2011-80, July 25, 2011
WASHINGTON — The Internal Revenue Service today announced that it will extend help to more innocent spouses by eliminating the two-year time limit that now applies to certain relief requests.
"In recent months, it became clear to me that we need to make significant changes involving innocent spouse relief," said IRS Commissioner Doug Shulman. "This change is a dramatic step to improve our process to make it fairer for an important group of taxpayers. We know these are difficult situations for people to face, and today’s change will help innocent spouses victimized in the past, present and the future."
The IRS launched a thorough review of the equitable relief provisions of the innocent spouse program earlier this year. Policy and program changes with respect to that review will become fully operational in the fall and additional guidance will be forthcoming. However, with respect to expanding the availability of equitable relief:
  • The IRS will no longer apply the two-year limit to new equitable relief requests or requests currently being considered by the agency.
  • A taxpayer whose equitable relief request was previously denied solely due to the two-year limit may reapply using IRS Form 8857, Request for Innocent Spouse Relief, if the collection statute of limitations for the tax years involved has not expired. Taxpayers with cases currently in suspense will be automatically afforded the new rule and should not reapply.
  • The IRS will not apply the two-year limit in any pending litigation involving equitable relief, and where litigation is final, the agency will suspend collection action under certain circumstances.
The change to the two-year limit is effective immediately, and details are in Notice 2011-70, posted today on
Existing regulations, adopted in 2002, require that innocent spouse requests seeking equitable relief be filed within two years after the IRS first takes collection action against the requesting spouse. The time limit, adopted after a public hearing and public comment, was designed to encourage prompt resolution while evidence remained available. The IRS plans to issue regulations formally removing this time limit.
By law, the two-year election period for seeking innocent spouse relief under the other provisions of section 6015 of the Internal Revenue Code, continues to apply. The normal refund statute of limitations also continues to apply to tax years covered by any innocent spouse request.
Available only to someone who files a joint return, innocent spouse relief is designed to help a taxpayer who did not know and did not have reason to know that his or her spouse understated or underpaid an income tax liability. Publication 971, Innocent Spouse Relief, has more information about the program.

Sunday, July 24, 2011

21 Workplace Benefits That Are Rapidly Disappearing

, On Friday July 22, 2011, 11:42 am EDT

Traditional pension plans, paid family leave, and even the company picnic are all on the decline. Employers have significantly cut many of the benefits they offer to workers over the past five years. Some 77 percent of companies report that benefits offerings have been negatively affected by the slow pace of recovery, according to a Society for Human Resource Management survey of 600 human resources professionals. "The two biggest areas where cuts have come have been in health care and retirement because that's where costs have increased the most," says Mark Schmit, research director of the Society for Human Resource Management in Alexandria, Va. Here is a look at the workplace perks that have significantly declined since 2007.
Traditional pension plans. Traditional pensions were offered at 40 percent of the companies surveyed in 2007. Now just 22 percent of firms provide access to a retirement plan that guarantees payments for life. More commonly offered retirement benefits include 401(k)s and similar types of retirement accounts (93 percent) and Roth 401(k) accounts (31 percent). However, the proportion of companies offering a 401(k) match declined from 75 percent in 2008 to 70 percent in 2011.
Retiree health care coverage. The proportion of companies offering retiree health insurance declined from 35 percent in 2007 to 25 percent in 2011, SHRM found. "Retiree medical plans are costly and the costs have changed over time due to factors outside the employer's control," says Stephen Parahus, a Towers Watson consultant. "More often than not new employees are not on a path that is going to earn them a subsidized employer benefit when they retire."
Long-term care insurance. Just over a quarter (29 percent) of employers provide long-term care insurance for workers, down from 46 percent in 2007. Even fewer employers offer access to an elder care referral service (9 percent), a significant decline from the 22 percent of firms that offered this benefit five years ago.
Health maintenance organizations (HMOs). The number of companies with HMOs decreased from 48 percent in 2007 to 33 percent today. Preferred provider organizations (PPOs) are much more common, with 84 percent of companies offering this type of health insurance plan.
Paid family leave. A third of companies offered paid family leave in 2007, but now only a quarter of companies provide paid time off for births, deaths, and other significant family events.
Adoption assistance. Adoption assistance is another waning employer benefit, with just 8 percent of companies helping with adoption costs, down from 20 percent five years ago. Foster care assistance also declined significantly from 10 percent of companies in 2007 to only 1 percent in 2011.
Professional development opportunities. Don't count on your company paying for you to attend an annual conference or symposium this year. While nearly all (96 percent) companies paid for professional development opportunities in 2007, only 87 percent will in 2011. The proportion of employers offering mentoring programs also decreased from 26 percent 5 years ago to 17 percent this year. "Work development is one of the things that helps train and recruit employees and can only be temporarily cut," says Schmit. "We see dips in it during recessionary times and then we see it come back following those recessionary times." Companies have also been cutting back on their subsidies for education expenses. The proportion of firms offering undergraduate and graduate educational assistance has declined by 10 and 11 percentage points respectively since 2007.
Life insurance for dependents. About half (55 percent) of companies provide life insurance for children and other dependents, down from 65 percent in 2007
Incentive bonus plans. Bonuses for executives are also on the chopping block. Incentive bonus plans for high-level employees are currently offered at half of the companies SHRM surveyed, down 10 percentage points since 2007.
Contraceptive coverage. Nearly 74 percent of employers provided coverage for contraceptives in 2007, a proportion that has since declined to 69 percent.
Casual dress day. Many people will need to take jeans out of their office attire rotation. Only about half (55 percent) of employers say they encourage or allow employees to dress casually one day per week, down from 66 percent in 2007. "Companies are focused on cutting out any of the extra kinds of things that might distract from their focus, even those programs that don't cost anything," says Schmit.
Legal assistance. One in five companies provides legal assistance or services to workers, down from a third of employers five years ago.
Sports team sponsorship. Your company may not renew its sponsorship of a local little league team next year. Only 17 percent of employers currently sponsor sports teams for workers or their families, a significant decrease from the 29 percent of companies that did so in 2007.
Executive club memberships. While about a quarter (24 percent) of companies subsidized executive club memberships for certain workers in 2007, now only 14 percent continue to provide this perk.
Relocation benefits. Relocating to a new place for a job often causes an employee to incur a variety of new expenses. Some companies step in to help finance some of the costs of the move. However, employers have significantly cut back on temporary relocation benefits, location visit assistance, and spouse relocation assistance. And only a small proportion of companies continue to offer to pay a cost-of-living differential (10 percent) or provide assistance selling the previous home (9 percent). "Instead of moving people to new facilities, companies might have them work as remote workers or take on a different style of work," says Schmit.
Help purchasing a home. Fewer companies now aid workers with their home purchases. The proportion of companies offering mortgage assistance has declined from 12 percent in 2007 to 3 percent today. Company-provided down payment assistance and rental assistance also declined significantly over the 5-year period.
Travel perks. Employers have cut back on the travel-related perks they will subsidize for employees including travel planning services (down 13 percentage points), paid long-distance calls home while on business travel (down 17 percentage points), travel accident insurance (down 9 percentage points), and paid dry cleaning while traveling for work (down 9 percentage points).
The company picnic. Many firms are cancelling the company picnic, and not due to rain. Only about half (55 percent) of firms scheduled a company picnic in 2011, down from 64 percent in 2007.
Rewards. Company-wide rewards programs for certain lengths of job tenure with the company (down 16 percentage points) and noncash rewards for performance (down 11 percent) have both been reduced or eliminated at many companies.
Company-purchased tickets. Season tickets to the local sports team or theater that are shared by employees are now only offered by about a quarter (26 percent) of employers, a considerable decline from the 42 percent of firms that provided workers with subsidized event tickets five years ago.
Take your child to work day. Many companies no longer encourage workers to bring their children in to spend a day at the office. Only a quarter of employers continue to participate in take your child to work day activates, down from over a third in 2007.

Saturday, July 23, 2011

Some flyers may not see savings from expired taxes

DALLAS (AP) -- Some airline customers won't see savings this weekend even though several federal taxes on tickets have expired.
US Airways and American Airlines raised fares to offset the tax savings.
That means instead of passing along the savings from expired taxes, the carriers are pocketing the money while customers pay the same amount as before.
But other airlines left their prices unchanged on Saturday. Consumers could save money by shopping around.
The expired taxes can total $25 or more on a typical $300 round-trip ticket. For a September trip between Dallas and San Francisco, the cheapest American flight on was $24 higher than offerings from United, Continental, Delta and Virgin America, which did not raise fares.
The taxes expired after midnight Friday night when Congress failed to pass legislation to keep the Federal Aviation Administration running.
That gave airlines a choice: They could do nothing -- and pass the savings to customers -- or they could grab some of the money themselves.
"We adjusted prices so the bottom-line price of a ticket remains the same as it was before ... expiration of federal excise taxes," said American spokesman Tim Smith. US Airways spokesman John McDonald said much the same thing -- passengers will pay the same amount for a ticket as they did before the taxes expired.
Smith declined to say whether the increase would be rescinded if Congress revives the travel taxes.
Tom Parsons, who runs the travel website, said consumers should get a break.
"Why would the airlines deserve it?" he said. "They already hit us with enough fees. Now they're keeping the government fees too."
The Transportation Department says it will lose $200 million a week. J.P. Morgan analyst Jamie Baker said airlines could take in an extra $25 million a day by raising fares during the tax holiday.
Parsons said competitive pressure eventually will force the airlines to match -- either they'll all pass the tax savings on to passengers, or they'll all raise fares and keep the money themselves.
Spirit Airlines said Saturday that it is passing on to customers all of the savings, which it said could amount to more than $50 per round trip.
Southwest Airlines and its AirTran subsidiary raised prices by $8 per round trip, said spokeswoman Marilee McInnis.
Southwest's support could be crucial if the airlines decide to keep the tax money. Southwest carries more U.S. passengers than anyone, and it effectively sets rates on many routes. Southwest torpedoed attempts by other airlines to raise prices in the last two weeks. CEO Gary Kelly has publicly worried that airlines could frighten away passengers by raising prices too high.
That may be less of a fear this time, however, since consumers wouldn't be shelling out more money for tickets -- they just wouldn't get an unexpected discount, courtesy of Congress.
Several federal travel taxes expired when Congress adjourned for the weekend without passing FAA legislation. Lawmakers couldn't break a stalemate over a Republican proposal to make it harder for airline and railroad workers to unionize.
Air traffic controllers stayed on the job, but thousands of other FAA employees were likely to be furloughed.
Airlines stopped collecting a 7.5 percent ticket tax, a separate excise tax of $3.70 per takeoff and landing, and other fees. Those add up to about $32 on a round-trip itinerary with base fare of $240 and one stop in each direction.
Other government fees for security and local airport projects are still being collected. They boost the final cost of that $240 base-fare ticket to $300.
Passengers who bought tickets before this weekend but travel during the FAA shutdown could be entitled to a refund of the taxes that they paid, said Treasury Department spokeswoman Sandra Salstrom. She said it's unclear whether the government can keep taxes for travel at a time when it doesn't have authority to collect the money.

100 Things Your Kids May Never Know About

100 Things Your Kids May Never Know About
Photo: kruemi's photos via Getty Images
There are some things in this world that will never be forgotten, this week’s 40th anniversary of the moon landing for one. But Moore’s Law and our ever-increasing quest for simpler, smaller, faster and better widgets and thingamabobs will always ensure that some of the technology we grew up with will not be passed down the line to the next generation of geeks.
That is, of course, unless we tell them all about the good old days of modems and typewriters, slide rules and encyclopedias …
Can you think of anything else that should be added to this list?

Audio-Visual Entertainment

    100 Things Your Kids May Never Know About
  1. Inserting a VHS tape into a VCR to watch a movie or to record something.
  2. Super-8 movies and cine film of all kinds.
  3. Playing music on an audio tape using a personal stereo.
  4. The number of TV channels being a single digit. I remember it being a massive event when Britain got its fourth channel.
  5. Standard-definition, CRT TVs filling up half your living room.
  6. Rotary dial televisions with no remote control. You know, the ones where the kids were the remote control.
  7. High-speed dubbing.
  8. 8-track cartridges.
  9. Vinyl records. Even today’s DJs are going laptop or CD.
  10. Betamax tapes.
  11. MiniDisc.
  12. Laserdisc: the LP of DVD.
  13. Scanning the radio dial and hearing static between stations.
  14. Shortwave radio.
  15. 3-D movies meaning red-and-green glasses.
  16. Watching TV when the networks say you should. Tivo and Sky+ are slowing killing this one.
  17. That there was a time before ‘reality TV.’
  18. 100 Things Your Kids May Never Know About

    Computers and Videogaming

  19. Wires. OK, so they’re not gone yet, but it won’t be long.
  20. The scream of a modem connecting.
  21. The buzz of a dot-matrix printer.
  22. 5- and 3-inch floppies, Zip Discs and countless other forms of data storage.
  23. Using jumpers to set IRQs.
  24. DOS.
  25. Terminals accessing the mainframe.
  26. Screens being just green (or orange) on black.
  27. Tweaking the volume setting on your tape deck to get a computer game to load, and waiting ages for it to actually do it.
  28. Daisy chaining your SCSI devices and making sure they’ve all got a different ID.
  29. Counting in kilobytes.
  30. Wondering if you can afford to buy a RAM upgrade.
  31. Blowing the dust out of a NES cartridge in the hopes that it’ll load this time.
  32. Turning a PlayStation on its end to try and get a game to load.
  33. Joysticks.
  34. Having to delete something to make room on your hard drive.
  35. Booting your computer off of a floppy disk.
  36. Recording a song in a studio.
  37. 100 Things Your Kids May Never Know About

    The Internet

  38. NCSA Mosaic.
  39. Finding out information from an encyclopedia.
  40. Using a road atlas to get from A to B.
  41. Doing bank business only when the bank is open.
  42. Shopping only during the day, Monday to Saturday.
  43. Phone books and Yellow Pages.
  44. Newspapers and magazines made from dead trees.
  45. Actually being able to get a domain name consisting of real words.
  46. Filling out an order form by hand, putting it in an envelope and posting it.
  47. Not knowing exactly what all of your friends are doing and thinking at every moment.
  48. Carrying on a correspondence with real letters, especially the handwritten kind.
  49. Archie searches.
  50. Gopher searches.
  51. Concatenating and UUDecoding binaries from Usenet.
  52. Privacy.
  53. The fact that words generally don’t have num8er5 in them.
  54. Correct spelling of phrases, rather than TLAs.
  55. Waiting several minutes (or even hours!) to download something.
  56. The time before botnets/security vulnerabilities due to always-on and always-connected PCs.
  57. The time before PC networks.
  58. When Spam was just a meat product — or even a Monty Python sketch.
  59. 100 Things Your Kids May Never Know About


  60. Typewriters.
  61. Putting film in your camera: 35mm may have some life still, but what about APS or disk?
  62. Sending that film away to be processed.
  63. Having physical prints of photographs come back to you.
  64. CB radios.
  65. Getting lost. With GPS coming to more and more phones, your location is only a click away.
  66. Rotary-dial telephones.
  67. Answering machines.
  68. Using a stick to point at information on a wallchart.
  69. Pay phones.
  70. Phones with actual bells in them.
  71. Fax machines.
  72. Vacuum cleaners with bags in them.
  73. 100 Things Your Kids May Never Know About

    Everything Else

  74. Taking turns picking a radio station, or selecting a tape, for everyone to listen to during a long drive.
  75. Remembering someone’s phone number.
  76. Not knowing who was calling you on the phone.
  77. Actually going down to a Blockbuster store to rent a movie.
  78. Toys actually being suitable for the under-3s.
  79. LEGO just being square blocks of various sizes, with the odd wheel, window or door.
  80. Waiting for the television-network premiere to watch a movie after its run at the theater.
  81. Relying on the 5-minute sport segment on the nightly news for baseball highlights.
  82. Neat handwriting.
  83. The days before the nanny state.
  84. Starbuck being a man.
  85. Han shoots first.
  86. “Obi-Wan never told you what happened to your father.” But they’ve already seen Episode III, so it’s no big surprise.
  87. Kentucky Fried Chicken, as opposed to KFC.
  88. Trig tables and log tables.
  89. “Don’t know what a slide rule is for …”
  90. Finding books in a card catalog at the library.
  91. Swimming pools with diving boards.
  92. Hershey bars in silver wrappers.
  93. Sliding the paper outer wrapper off a Kit-Kat, placing it on the palm of your hand and clapping to make it bang loudly. Then sliding your finger down the silver foil to break off the first finger.
  94. A Marathon bar (what a Snickers used to be called in Britain).
  95. Having to manually unlock a car door.
  96. Writing a check.
  97. Looking out the window during a long drive.
  98. Roller skates, as opposed to blades.
  99. Cash.
  100. Libraries as a place to get books rather than a place to use the internet.
  101. Spending your entire allowance at the arcade in the mall.
  102. Omni Magazine.
  103. A physical dictionary — either for spelling or definitions.
  104. When a ‘geek’ and a ‘nerd’ were one and the same.

Getting a Tax Credit for Your Honey Do List

Summer is a great time to tackle home improvements – and, happily, it’s not too late to receive a tax credit when making your home more energy efficient. Although significantly reduced from 2010 levels, energy-efficiency tax credits are still available in 2011.
The home energy credit applies to energy-related improvements, such as adding insulation, energy-efficient exterior windows, and energy-efficient heating and air-conditioning systems to an existing home that is your primary residence. The tax credit is not available on rental properties or new construction.
The tax credit is 10% of the cost of the home improvement, up to a maximum of $500. There is a lifetime limit of $500, so if you took a $500 credit in 2010, you do not qualify in 2011. The tax credit expires December 31, 2011.
The credit on some items have been reduced below $500:
• Windows limited to $200; Energy Star qualification.
• Air conditioners, water heaters, and biomass stoves limited to $300.
• Furnace and boiler improvements limited to $150 and must meet certain standards.
• $50 credit for advanced main air circulating fans.
Further, the Residential Energy Efficient Property Credit is a nonrefundable energy tax credit that helps individual taxpayers pay for certain alternative-energy equipment, such as solar hot water heaters, geothermal heat pumps, and wind turbines. The maximum amounts for a credit equal 30% of the cost of qualified property, with no upper limit. This credit expires on December 31, 2016, and is available for new and existing homes, whether primary or second. Rentals do not qualify.
We’re happy to help you sort out the tax credits available for your home improvements this summer. Just give us a call or send us an email.

Hell Must Be Freezing Over; AMT Is On The Chopping Block

 Jul. 20 2011 
The “Gang of Six” US senators has released a summary of their plan to reduce the Federal budget deficit.  One of the plan’s provisions is eliminate the Alternative Minimum Tax or AMT.  Hell must be freezing over.
In 1969, Congress wrestled with the ability of high income earners to deduct away their income tax liability.  Congress effectively created a second income tax system that disallowed certain deductions and imposed a higher, flat tax rate on all income.  It is called the Alternative Minimum Tax or AMT.  Technically, all income tax filers are supposed to do the AMT calculation on every return.  For some AMT is due, for others AMT is not due.  In the past, few filers owed AMT.  But, according to the Congressional Budget Office, in 2010, over 50 percent of two-income/middle-income families had been pulled into the AMT system, much to their surprise.

While the intention was good, it is now having disastrous effects.  Clearly, the AMT is affecting individuals it had never intended to affect.  Interestingly, a review of Congressional committee minutes of the legislation that enacted the AMT finds that Satan himself testified the AMT would be a good thing.  This, of course, now casts doubt upon Congress’ true intentions.  Unfortunately, no one is calling for hearings on the matter.

It really wasn’t until the mid to late 1970s that Congress thought about indexing tax brackets to inflation to counter what is known as “bracket creep.”  Bracket creep occurs when the dollar level of income tax rate brackets remain static.  When someone receives a pay raise to offset inflation, he or she gets bumped into a higher income tax rate bracket.  The AMT threshold is static and not indexed to inflation.  Over the years, Congress has put in many temporary relief measures but all sunset eventually.  As mentioned above, the AMT is now affecting people it was never intended to affect.

The Internal Revenue Code has seen complete overhauls about every 20 to 30 years.  In a previous article, I forecast that it would likely see another overhaul by 2015.  I have also mentioned that both Democrats and Republicans were talking about the need for a major overhaul and were not too far from each other conceptually.  When I say that they were not too far from each other, I mean the structure of the Code.  And, officials from the Treasury Department and the OECD have been in discussions to align US tax policies with those of most other countries.

If Congress follows through on the Gang of Six’s proposal to eliminate the AMT, hell might well freeze over.

Friday, July 22, 2011

States Where People Pay the Most (and Least) in Taxes

by 24/7 Wall St. Staff
Thursday, July 21, 2011

By Charles B. Stockdale, Michael B. Sauter, Douglas A. McIntyre
Different states tax their residences at different levels. In some states, like New Jersey, residents pay 12.2% as a percentage of their income. In others, like Alaska, they pay as little as 6.3%. 24/7 Wall St. reviewed a report recently released by the Tax Foundation to identify the states where residents paid the most and least in state and local taxes as a percent of income.
The amount varies widely as not all states have the same sources of revenue. Some get more from business levies than others. Some have a statewide sales tax. Some cities and towns tax property based on value, while others don't. The issue of what people are taxed at the state and local level is complex, among other reasons, because states often receive a large amount of their tax receipts from sources other than the simple payments of state residents.
The Tax Foundation report, "State-Local Tax Burdens Fall in 2009 as Tax Revenues Shrink Faster than Income," shows the extent of the differences. The most important reason for the variation is that some states generate a significant amount of their tax revenue from businesses and out-of-state residents, thereby minimizing the burden of taxes borne by residents. Alaska, for example, gets 80% of tax receipts from such sources. State residents get the equivalent of a subsidy from some of the world's largest oil companies.
Conversely, states with low out-of-state business receipts must collect a higher percent of taxes from their residents. This is case in New Jersey, which gets only 20% of its tax receipts from such sources. As a matter of fact, most of the really large companies in the region are on the other side of New Jersey's northeast border in New York State, thereby creating a higher burden on residents.
Mark Robyn, economist at the Tax Foundation and author of the report, told 24/7 Wall St. that the "study accounts for the fact that all states are able to some extent to shift their tax burden onto the taxpayers of other states. Much of this 'tax exporting' happens naturally through no special effort by policymakers, but some states have special sources of revenue that allow them to export more of their burden to non-residents. For example, Nevada relies on tourism taxes, while Alaska, Wyoming and North Dakota rely heavily on oil taxes that are passed on to consumers around the country."
The Tax Foundation's report divides state tax revenue into two categories: the amount contributed by residents, including income, property and sales tax, and the amount contributed by non-residents, including taxes paid by out-of-state businesses and taxes collected by in-state business and paid by out-of-state residents. According to the Tax Foundation, because residents effectively pay more as consumers and receive less as employees as a result of corporate taxes, some business tax is also considered borne by the resident. Taxes paid by out-of-state business to the state include the tax Alaska collects from out-of-state oil companies to operate in the state. Taxes collected by in-state business from out-of-state residents include tax on things like sales tax and revenue from tourism.
In addition to the report from the Tax Foundation, 24/7 Wall St. reviewed data from the Census Bureau, the Federation of Tax Administrators, and the Mercatus Center at George Mason University.
The total tax burden an individual pays refers to the percentage of state residents' income that goes to state and local taxes, and, on top of that, what each person must pay the federal government. The equation that puts all of those numbers together is complicated, and is among the reasons that the debate over federal taxes is so heated. People often end up with payments to several tax authorities. Their nominal federal tax rate may mean very little when it comes to what must be paid to all applicable government bodies at the end of each year. The amount that a person keeps from each dollar that he or she earns can be affected more by local government needs than those of the federal government.
These are the states where residents pay the most and least in taxes.
The Ten States with the Highest Tax Burdens
10. Pennsylvania
Taxes paid by residents as pct. of income: 10.1%
Total state and local taxes collected: $109.7 billion
Pct. of total taxes paid by residents: 76.3%
Pct. of total taxes paid by non-residents: 23.7%
Pennsylvania has among the largest revenues in the country. The great majority of this money comes from its residents. Approximately one third of state tax revenue comes from individual income taxes. Another one half comes from various sales taxes. Pennsylvania also has the highest state corporate tax rate in the country. There are a number of ways the state could increase the amount of taxes it "exports" to non-residents, however. The state can further expand its burgeoning gambling industry. According to the Pennsylvania Gaming Control Board, $81.4 million in tax revenue was generated by table games in the most recent fiscal year. The state could also pass a tax on natural-gas drilling, as it is currently the only state without one.
9. Maine
Taxes paid by residents as pct. of income: 10.1%
Total state and local taxes collected: $10.7 billion
Pct. of total taxes paid by residents: 64.7%
Pct. of total taxes paid by non-residents: 35.3%
For a state with one of the highest tax burdens on its residents, Maine has a relatively large percent of its total tax revenue come from out-of-state residents and business, standing at more than 35%. Maine has the eighth lowest population and the tenth lowest tax revenue. The state has middle-of-the-road taxes for gasoline and alcohol, but at $2.00 per pack, it is tied with Michigan and Alaska for the 11th highest tobacco tax.
8. Vermont
Taxes paid by residents as pct. of income: 10.2%
Total state and local taxes collected: $6.1 billion
Pct. of total taxes paid by residents: 62.1%
Pct. of total taxes paid by non-residents: 37.9%
Vermont collects a relatively large percentage of its tax revenue from non-residents. The state has one of the largest shares of vacation homes in the country, and collects a major portion of its property tax revenue from these homes, effectively taxing residents of other states. Despite this, residents of Vermont have among the greatest tax burden in the country. A large reason for this is the state's excise taxes, or taxes on the sale of goods and services. According to a recent report from the Mercatus Center titled, "Excise Taxes in the States," Vermont collected the greatest amount in excise taxes per capita in 2010, $858. This includes taxes on things such as tobacco, alcohol, insurance, and motor fuels.
7. Minnesota
Taxes paid by residents as pct. of income: 10.3%
Total state and local taxes collected: $45.7 billion
Pct. of total taxes paid by residents: 75.5%
Pct. of total taxes paid by non-residents: 24.5%
Less than 25% of Minnesota's tax revenue comes from non-residents and businesses. The state only collects average, or below average, rates on alcohol and tobacco, and has one of the smallest tourism economies in the country. This means the state relies heavily on income and property taxes from residents. Minnesota has the 21st largest population in the country, but it collects the 12th most in tax revenue each year. The state and local taxes collected per capita is the seventh highest in the country, as is the tax burden as a percent of income.
6. California
Taxes paid by residents as pct. of income: 10.6%
Total state and local taxes collected: $354 billion
Pct. of total taxes paid by residents: 82.5%
Pct. of total taxes paid by non-residents: 17.5%
California is exceptional in many ways when it comes to taxing its residents. The state has the highest statewide sales tax in the country, currently 8.25%. It also has the highest tax on gas, charging 46.6 cents per gallon. The state collects among the lowest amount of taxes from non-residents and business out of all the states. But with the lowest credit rating in the nation, according to S&P, an ongoing budget problem, and a $10.8 billion deficit, one of the biggest in the country, the state may want to change its approach.
5. Rhode Island
Taxes paid by residents as pct. of income: 10.7%
Total state and local taxes collected: $9.4 billion
Pct. of total taxes paid by residents: 70.9%
Pct. of total taxes paid by non-residents: 29.1%
Rhode Island is one of the smallest states and has one of the smallest revenues. Despite this, residents' tax burdens are among the highest. Each year, the average Rhode Islander pays $671 in state "sin taxes," or taxes on things such as alcohol, tobacco, and gambling. This is the second highest amount in the country, behind only Delaware. Part of the reason for this is that the state taxes each pack of cigarettes $3.46, the second highest in the country. The state's tax burden is hurting business as well. Rhode Island has an exceptionally high corporate tax rate of 9% and was recently rated as the worst state for business by CNBC.
4. Wisconsin
Taxes paid by residents as pct. of income: 11%
Total state and local taxes collected: $41.7 billion
Pct. of total taxes paid by residents: 77.9%
Pct. of total taxes paid by non-residents: 22.1%
According to the Milwaukee Journal Sentinel, Wisconsin relies more on income and property taxes for its revenue than most states. In fact, both are approximately 25% higher than the national averages. The state receives a smaller portion of federal money than most others, leaving little room for this money to offset state spending. Worst still, taxes on industrial property owners rank among the bottom half, and often the bottom third, of the country, while residential taxes are among the greatest. According to a study by the Institute on Taxation and Economic Policy, Wisconsin's middle class pays a bigger share of government spending than any other state, except for New York.
3. Connecticut
Taxes paid by residents as pct. of income: 12%
Total state and local taxes collected: $33.3 billion
Pct. of total taxes paid by residents: 80.1%
Pct. of total taxes paid by non-residents: 19.9%
The state with the highest per capita income in the country collects more than $5,000 per resident on average, the most in the country. It is the 30th most populous state in the U.S., but it collects the 19th most in tax revenue. Less than 20% of Connecticut's tax revenue comes from non-residents and business. According to the Tax Foundation, the state ranks 47th in business environment, with a 7.5% tax on businesses. The state's residents have a higher tax burden than all but two other states. Part of the reason for this has to do with the fact that the taxes Connecticut commuters pay to the empire state counts as part of the Connecticut tax burden.
2. New York
Taxes paid by residents as pct. of income: 12.1%
Total state and local taxes collected: $243.9 billion
Pct. of total taxes paid by residents: 71.4%
Pct. of total taxes paid by non-residents: 28.6%
New York places much of its tax burden on residents from other states. Consider, for example, the amount of state revenue derived from New York City tourism, or those who commute to the city for work. Despite this, state residents maintain the second largest tax burden in the country. The state has one of the highest state and local tax collections per capita, an average of $6,884. It has one of the highest combined averages local and state sales tax rates — 8.3%. The Big Apple also has a number of exceptionally high excise taxes, such as its $4.35 tax on each pack of cigarettes, the highest rate in the country. Additionally, the state has exceptionally high property tax rates. According to the Census Bureau, the top ten counties in the U.S. with the highest property taxes as a percentage of home values are all in New York.
1. New Jersey
Taxes paid by residents as pct. of income: 12.2%
Total state and local taxes collected: $85.9 billion
Pct. of total taxes paid by residents: 79.5%
Pct. of total taxes paid by non-residents: 20.5%
New Jersey residents have a higher tax burden than those of any other state. As a percent of their income, taxes in the Garden State were 12.2% in 2009, nearly double that of Alaska. Like Connecticut, much of this tax burden comes from state residents who commute to New York City and pay taxes there as well. This illustrates how a state resident contributes to the tax base of multiple states. Although not reflected in the percent of income residents pay in state and local taxes, it is nonetheless an additional burden commuters have to bear. According to Tax Foundation, the state has the third-worst environment for business in the country, with a corporate tax rate of 9%. It also has an above-average sales tax, as well as one of the highest rates in the country for cigarettes and liquor.
The Ten States with the Lowest Tax Burdens
10. New Mexico
Taxes paid by residents as pct. of income: 8.4%
Total state and local taxes collected: $16.9 billion
Pct. of total taxes paid by residents: 59%
Pct. of total taxes paid by non-residents: 41%
The state and local tax burden on New Mexico residents is the tenth lowest in the country. The state has a slightly below-average business climate, with a corporate tax rate ranging from 4.8% to 7.6%. Gasoline taxes are quite low, but excise taxes on alcohol and cigarettes are above average. The state tax on beer is one of the highest in the country. A high percentage of state and local revenues come from non-residents. This is usually the case with most states with a low tax burden on its residents. Per capita, state residents pay just $2,027, the sixth-lowest amount in the country.
9. Louisiana
Taxes paid by residents as pct. of income: 8.2%
Total state and local taxes collected: $44.2 billion
Pct. of total taxes paid by residents: 54%
Pct. of total taxes paid by non-residents: 46%
Despite having the fifth highest average state and local sales tax rate, residents of Louisiana have a relatively low tax burden. A leading reason for this is the simple fact that, on average, residents pay one of the smallest amounts of total state and local taxes in the country. According to the Tax Foundation, property taxes in the state are $565.23 per capita, the fifth lowest amount among states. Louisiana also collects $1.78 in federal spending for every dollar spent on federal taxes — the fourth highest ratio. This rate of federal spending helps offset the need for higher state revenue from taxes.
8. South Carolina
Taxes paid by residents as pct. of income: 8.1%
Total state and local taxes collected: $35.4 billion
Pct. of total taxes paid by residents: 66%
Pct. of total taxes paid by non-residents: 34%
Residents of South Carolina pay the second smallest total amount in state and local taxes per person in the country, behind only Mississippi. The average person in the state pays $2,742 in taxes. Excise taxes are extremely low: the state has the fifth lowest gasoline tax in the country and the ninth lowest cigarette tax. The state also has relatively low property taxes at both the state and local level.
7. New Hampshire
Taxes paid by residents as pct. of income: 8%
Total state and local taxes collected: $9.6 billion
Pct. of total taxes paid by residents: 56.4%
Pct. of total taxes paid by non-residents: 43.6%
New Hampshire "has no special revenue source from non-residents, but the citizens' approval of limited government spending has kept the tax burden low," according to the Tax Foundation, The state has a flat 5% income tax rate that only applies to dividend and interest income, but, effectively, no tax on wages, and as a result most residents don't have to pay it. The state is also one of only five states that has no sales tax. This causes many people from outside of the state to travel to New Hampshire to purchase goods that are heavily taxed in their own states. Not all taxes in New Hampshire are low, however. The state has the third highest property tax rate in the country.
6. Texas
Taxes paid by residents as pct. of income: 7.9%
Total state and local taxes collected: $196.5 billion
Pct. of total taxes paid by residents: 63.4%
Pct. of total taxes paid by non-residents: 36.6%
The population of Texas is 30% larger than New York, but collects more than 60% less in tax revenue than the Empire State. The tax burden on residents is the sixth lowest in the country, at just 7.9% of average income per resident. The biggest reason for this is that the state is one of just six in the country to levy no personal income tax. Texas also has the 11th lowest sales tax, at 7.39%, and average or below average rates on gasoline, cigarettes and alcohol.
5. Wyoming
Taxes paid by residents as pct. of income: 7.8%
Total state and local taxes collected: $9.3 billion
Pct. of total taxes paid by residents: 29.9%
Pct. of total taxes paid by non-residents: 70.1%
Besides Alaska, Wyoming has the greatest percentage of its state revenue paid for by non-residents. This is because of taxes on oil and coal that bring money in from out-of-state oil and mineral companies. These taxes account for such a large percentage of Wyoming's revenue that the state does without a corporate income tax. The state also has no individual income taxes. Wyoming has an average state and local sales tax rate of 5.38%, one of the lowest in the country.
4. Tennessee
Taxes paid by residents as pct. of income: 7.6%
Total state and local taxes collected: $48 billion
Pct. of total taxes paid by residents: 63.7%
Pct. of total taxes paid by non-residents: 36.3%
Tennessee has the eleventh lowest per capita income in the country. Residents of the state pay just $1,851 in taxes, the second lowest amount in the U.S. The state's business climate is average, but other taxes are relatively low. The sales tax of 7% is one of the highest in the country, but food purchases are exempt from all but 1.5% of that. Dividend and interest income is taxed in the state at a rate of 6%, but there is no other personal income tax levied. Tennessee collects no state-level property tax, one of just a few to do so.
3. South Dakota
Taxes paid by residents as pct. of income: 7.6%
Total state and local taxes collected: $5.2 billion
Pct. of total taxes paid by residents: 56%
Pct. of total taxes paid by non-residents: 44%
Since 1977, South Dakota's tax burden has dropped from 9.1% to 7.6%, causing the state to change from the 15th least burdened state to the third least burdened. The state has no corporate or individual income tax. It is easier for South Dakota to keep a low tax burden than many other states, however. According to the most recent data available from the Tax Foundation, South Dakota receives $1.53 back for every dollar collected in federal taxes, lessening the state's dependence on state and local revenue.
2. Nevada
Taxes paid by residents as pct. of income: 7.5%
Total state and local taxes collected: $20 billion
Pct. of total taxes paid by residents: 52.5%
Pct. of total taxes paid by non-residents: 47.5%
Nevada has the second-lowest tax burden in the country, with residents paying just 7.5% of their income on state and local taxes. Nearly half of all state tax revenue comes from non-residents. According to the Tax Association's State Business Tax Climate Index, Nevada has one of the most favorable environments for business, as it is one of the four states to levy no corporate tax at all. A significant amount of the state's revenue comes from "sin taxes" on gambling, alcohol, and tobacco, most of which comes from tourists. Sales tax is above the national average, and the tax on gasoline is one of the highest in the country. Counties are also allowed to levy additional gas taxes on top of the state.
1. Alaska
Taxes paid by residents as pct. of income: 6.3%
Total state and local taxes collected: $18.8 billion
Pct. of total taxes paid by residents: 20.5%
Pct. of total taxes paid by non-residents: 79.5%
Alaskans have the lowest tax burden of any state in the country, paying just 6.3% of their income in state and local taxes. This is over one full percentage point lower than the state with the second smallest tax burden. According to the Tax Foundation, "Before the Trans-Alaska pipeline was finished in 1977, taxpayers in Alaska bore the second-highest tax burden in the country. By 1980, with oil tax revenue pouring in, Alaska repealed its personal income tax and started sending out checks instead. The tax burden plummeted, and now Alaskans are the least taxed." The state also levies no personal income tax or sales tax.

The case of the double-headed gold coins

Double Eagle gold coins (AP)
It's a case that combines history and mystery--and very valuable gold coins. The stakes were certainly high: One of these rare $20 pieces sold for a record $7.59 million in 2002.
Here's the story. A jury decided that a Philadelphia woman, Joan Langbord, who found the coins in her father's bank deposit box, never should have owned them, and that the U.S. government was right to take them back.

The government argued that the never-circulated gold coins should never have been anywhere outside the U.S. Mint. Only a half-million of the coins were made. The rare "double eagle" coins, designed by sculptor August Saint-Gaudens, are fervently sought by collectors—and worth a mint. When the United States abolished the gold standard in 1933, most of the pieces were melted down.
Two were sent to the Smithsonian, and 20 disappeared—the very 20 that can be traced to Langbord's father, a Philadelphia jeweler named Israel Switt. In challenging Langbord's ownership rights, the government argued that the dollar coins were most likely stolen. Langbord, who is 81, argued that her father did business with the Mint, and the coins could have been acquired legally.
But the government case seemed to sway the jury against Switt: The jeweler had been investigated for illegally possessing gold coins in the 1930s and '40s, but Switt was never prosecuted because the statute of limitations had expired.
The Secret Service believed that Switt worked a shady deal with a cashier inside the U.S. Mint to acquire the coins, which are currently being held at Fort Knox.

Wednesday, July 20, 2011

10 Tips to Ease Tax Time for Military

Military personnel have some unique duties, expenses and transitions. Some special tax benefits may apply when moving to a new base, traveling to a duty station, returning from active duty and more. These tips may put military members a bit “at ease” when it comes to their taxes.
  1. Moving Expenses If you are a member of the Armed Forces on active duty and you move because of a permanent change of station, you can deduct the reasonable unreimbursed expenses of moving you and members of your household.
  2. Combat Pay If you serve in a combat zone as an enlisted person or as a warrant officer for any part of a month, all your military pay received for military service that month is not taxable. For officers, the monthly exclusion is capped at the highest enlisted pay, plus any hostile fire or imminent danger pay received.
  3. Extension of Deadlines The time for taking care of certain tax matters can be postponed. The deadline for filing tax returns, paying taxes, filing claims for refund, and taking other actions with the IRS is automatically extended for qualifying members of the military.
  4. Uniform Cost and Upkeep If military regulations prohibit you from wearing certain uniforms when off duty, you can deduct the cost and upkeep of those uniforms, but you must reduce your expenses by any allowance or reimbursement you receive.
  5. Joint Returns Generally, joint returns must be signed by both spouses. However, when one spouse may not be available due to military duty, a power of attorney may be used to file a joint return.
  6. Travel to Reserve Duty If you are a member of the US Armed Forces Reserves, you can deduct unreimbursed travel expenses for traveling more than 100 miles away from home to perform your reserve duties.
  7. ROTC Students Subsistence allowances paid to ROTC students participating in advanced training are not taxable. However, active duty pay – such as pay received during summer advanced camp – is taxable.
  8. Transitioning Back to Civilian Life You may be able to deduct some costs you incur while looking for a new job. Expenses may include travel, resume preparation fees, and outplacement agency fees. Moving expenses may be deductible if your move is closely related to the start of work at a new job location, and you meet certain tests.
  9. Tax Help Most military installations offer free tax filing and preparation assistance during the filing season.
Tax Information IRS Publication 3, Armed Forces’ Tax Guide, summarizes many important military-related tax topics. Publication 3 can be downloaded from or may be ordered by calling 1-800-TAX-FORM (800-829-3676).

Homeowners in Denial About Value of Properties

, On Tuesday July 19, 2011, 2:00 pm EDT
Homeowners, especially those who bought their houses after the real-estate bubble burst, are still having trouble accepting just how much the values of their properties may have fallen, says a new report from the real-estate site Zillow.
Current sellers who bought their homes in 2007 or later, an analysis of the site's home listings shows, are overpricing their properties by an average of 14 percent.
Sellers who bought their houses before the bubble, and those who bought during the big run-up in home values, also are overpricing their homes, but not by as much. Those who bought before 2002 are pricing their homes roughly 12 percent over market value, while those who bought from 2002-06 price them about 9 percent over market value.
In the analysis, Zillow compared the asking price of one million homes for sale to the homes' previous purchase price, then factored in the change in the Zillow Home Value Index for the respective ZIP code, to determine an estimate of that home's current market value.
Stan Humphries, Zillow's chief economist, says those who bought post-bubble, in 2008, 2009 or later, seem to think they escaped the worse of the housing market debacle and tend to price their homes too high as a result. But 2006 was just the start of the housing recession, which continues today; home values are now down nearly 30 percent from the market's peak. And, values have fallen about 12 percent from January 2009 through May of this year, he says.
That means, he says, that even people who bought after the bubble burst need to take a hard look at what has happened in their local market since they bought their home. Traditionally, people tend to overprice their homes a bit anyway, to allow room for negotiation. But unrealistic overpricing in the current environment, he says, means properties stagnate.
Sellers, he said, need primarily to consider comparable sales and asking prices in their market when setting an asking price for their home. Factoring in what they paid for their home, or how much they owe on their mortgage, "leads to conclusions that are divorced from the outside market," he said, and the market determines whether a buyer is interested in your house: "The buyer doesn't care what you paid or what your mortgage is."
Of course, some sellers who owe more than their house is worth are limited in how low they can price their home because selling for less than their mortgage means they'll have to negotiate a short-sale with their bank. "They're hoping against hope that they can sell at a higher price," Mr. Humphries said.
But others are simply faced with a reluctance -- understandable, to be sure -- to sell the house for less than they paid. "They could price more aggressively, but there's a psychological hurdle," he says. "They don't want to realize a loss."
Humphries foresees home values continuing to fall through the middle of next year for a variety of reasons, including persistent unemployment, a significant pipeline of homes in foreclosure, as well as high rates of homes with negative equity, which means many more will likely end up in foreclosure. A return to a "normal" market is likely at least three  away, he says.
Is your home on the market? What factors went into your asking price?

Private Sector Saves Good Samaritan from the Wrath of the IRS

On July 9th, Derek Jeter became the 28th player in baseball history to reach 3,000 hits.  As if the feat weren't memorable enough, he accomplished it in grand fashion—by launching a home run to left field.
As the ball bounced among a sea of Yankees fans, it ended up in the hands of possibly the least greedy potential owner in attendance that afternoon—Christian Lopez.  After securing his priceless piece of baseball history, he did the unthinkable; he gave the ball to Derek Jeter and asked for nothing in return.
What did Lopez get for his selfless generosity?  He was rewarded with four front-row Legends seats for the remainder of the 2011 season, including the postseason, along with three bats, three balls, and two jerseys autographed by Jeter, his own baseball card, and a whopping estimated tax bill of $14,000!  Though Mr. Lopez was very gracious, acknowledging that he harbored no ill will toward the IRS, he could not have been thrilled.
 But worry not; private sector incentives came to the rescue.  Soon after Lopez's surreal windfall, Miller High Life publicly stated that the company would pay Lopez's tax bill. In addition, Modell's Sporting Goods (a 2009 Yankees sponsor) donated a 2009 World Series ring to the lucky fan.  As if this were not an adequate display of generosity, the company's CEO and fellow CEO Brandon Steiner of Steiner Sports have promised Lopez $50,000 to help pay off his student loans.
To those continually maligning capitalism for incentivizing greed, this is a lesson learned:  Self-interest can precipitate benevolence.  In the end, Mr. Lopez gave a priceless ball away, was showered with invaluable gifts, and paid off part of his student debt.  In addition, Miller High Life, Modell's Sporting Goods, Steiner Sports, Topps (the baseball card company producing Lopez's official card), and the Yankees organization are enjoying immeasurable publicity that undoubtedly helps their respective images, likely improving their bottom lines.  This is no accident.
Free market forces brought about by taxation of a likeable guy made winners of every party involved-even the Internal Revenue Service.

Tuesday, July 19, 2011

Should I Contribute to a Traditional or Roth 401(k)?

by Walter Updegrave
Monday, July 18, 2011
provided by
I'm just starting out in my career and I'm trying to decide how to divide my contributions between my company's regular 401(k) plan and its Roth 401(k). I've heard that I'm better off putting money into the Roth because I'm probably in the lowest tax bracket I'll ever be in. If I contribute 10% of my pay, should I just put 5% in each? Or should I put it all in the Roth 401(k) and switch to a regular 401(k) later in my career as my tax burden rises?  Derek, Kansas City, Mo.
In theory, as a young person you are likely to pay the lowest tax rates early on in your career when your income is probably smallest.
On balance, that argues for contributing to a Roth 401(k) and paying the tax on the contribution now at a low tax rate and sidestepping a higher rate later on rather than contributing to a regular 401(k) and paying a higher rate down the road.
But arbitraging tax rates isn't always so neat and clean in the real world. Your income might not grow as much as you think. And tax rates can, and do, change frequently. So it's hard to predict where they might be decades from now.
What really counts in the traditional-versus-Roth 401(k) calculation is the difference between the tax rate you face at the time you contribute to your 401(k) and the rate you pay when you withdraw the money in retirement. (Or, more accurately, "rates" you may pay as you might not face the same rate every year.).
That's not just a matter of the tax brackets that prevail when you are retired, but also the size of your retirement income. Keep in mind that even if the brackets have gone up, you could still face the same or even lower tax rate if your income has fallen off enough after you retire.
So while I think it makes sense for you to favor the Roth 401(k), I wouldn't fund the Roth exclusively. I'd also put some dough into the traditional 401(k), too — if for no other reason than to hedge my bets about future tax rates.
I can't give you a formula or rule of thumb for divvying up your 401(k) contribution. It's really more a matter of how confident you feel about your likely tax situation in retirement.
If you're on the fence — with no strong opinion either way — then you might try to keep roughly equal amounts in both accounts. However, the more you feel that, one way or another, you'll be facing higher tax rates when you begin drawing money from your retirement accounts, the more you should lean toward the Roth 401(k).
For example, if you're really convinced you'll be hit with a higher tax rate then you could shoot for a ratio like 70% Roth 401(k) and 30% traditional. If, on the other hand, you think the opposite is more likely to be true — that is, you'll end up in a lower tax bracket — then you might reverse the percentages.
These aren't carved-in-stone rules. They're just rough guidelines that you can adjust based on your own preferences.
There are also a few other things you'll want to consider. The more you favor the Roth, the less of your income will be sheltered from taxes today and, thus, the higher your current tax bill.
Charles Schwab's 401(k) calculator can show you the effect different levels of contributions to traditional and Roth 401(k)s will have on your tax tab and take-home pay.
Also, remember that contributing to a traditional 401(k) lowers your adjusted gross income. So to the extent you contribute to a Roth 401(k) instead, your adjusted gross income will be higher, which may affect your ability to take deductions pegged to adjusted gross income, such as medical and miscellaneous expenses. It may even determine whether you can do a traditional or Roth IRA.
And don't forget that if your employer matches any part of your 401(k) contribution, then even if you contribute solely to the Roth 401(k), you will still end up with money in the traditional. That's because employers are required to put all matching funds in a traditional 401(k).
So say you earn $40,000 and contribute 10% of your salary, or $4,000, and divide it equally between your traditional and Roth 401(k) and your employer matches 50% of that amount, or $2,000. Over the course of a year, you would actually end up with $2,000 going into the Roth, while your traditional IRA would get double that amount, or $4,000 (your $2,000, plus your employer's $2,000 match).
Be sure to take any employer match like this into account when divvying up your contribution. Don't get too obsessed about this, though, as there's no way to accurately predict the tax rate you'll face in just a few years — let alone 30 or more years.
Besides, you can always make adjustments later on by contributing more to one account or another or, assuming you qualify, contributing to a traditional or Roth IRA.
You also have the option of converting dollars in a regular IRA or 401(k) to a Roth IRA and, possibly, do an "in-plan" rollover, from a traditional 401(k) to a Roth 401(k).
At the end of the day, your retirement security will depend more on whether you consistently sock away that 10% of your salary year after year throughout your career than how you divvy it up between traditional and Roth accounts.