Wednesday, November 30, 2011

IRS Seeks to Return $153 Million in Undelivered Checks to Taxpayers

Recommends e-file, Direct Deposit to Avoid Future Delivery Problems 

WASHINGTON — In an annual reminder to taxpayers, the Internal Revenue Service announced today that it is looking to return $153.3 million in undelivered tax refund checks. In all, 99,123 taxpayers are due refund checks this year that could not be delivered because of mailing address errors.
Undelivered refund checks average $1,547 this year.
Taxpayers who believe their refund check may have been returned to the IRS as undelivered should use the “Where’s My Refund?” tool on The tool will provide the status of their refund and, in some cases, instructions on how to resolve delivery problems.
Taxpayers checking on a refund over the phone will receive instructions on how to update their addresses. Taxpayers can access a telephone version of “Where’s My Refund?” by calling 1-800-829-1954.
While only a small percentage of checks mailed out by the IRS are returned as undelivered, taxpayers can put an end to lost, stolen or undelivered checks by choosing direct deposit when they file either paper or electronic returns. Last year, more than 78.4 million taxpayers chose to receive their refund through direct deposit. Taxpayers can receive refunds directly into their bank account, split a tax refund into two or three financial accounts or even buy a savings bond.
The IRS also recommends that taxpayers file their tax returns electronically, because e-file eliminates the risk of lost paper returns. E-file also reduces errors on tax returns and speeds up refunds. Nearly 8 out of 10 taxpayers chose e-file last year. E-file combined with direct deposit is the best option for taxpayers to avoid refund problems; it’s easy, fast and safe.
The public should be aware that the IRS does not contact taxpayers by e-mail to alert them of pending refunds and does not ask for personal or financial information through email.  Such messages are common phishing scams.  The agency urges taxpayers receiving such messages not to release any personal information, reply, open any attachments or click on any links to avoid malicious code that can infect their computers.  The best way for an individual to verify if she or he has a pending refund is going directly to and using the “Where’s My Refund?” tool. 

Thursday, November 17, 2011


When a house is foreclosed upon by the bank, the owners typically receive Form 1099-A from the lender showing several pieces of relevant information. The information on Form 1099-A will likely be needed to report the foreclosure on your tax return. A foreclosure is treated as the sale of property, and the former property owner will need to calculate their gain or loss on the property. But unlike a normal sale, there's no "selling price," and this is where the Form 1099-A comes into play. 
Taxpayers will need to report the foreclosure just like it were a sale of the property. And to properly report this, you'll need to know the selling date and selling price of the property. Form 1099-A provides you with the date of sale and the "selling price" of the property, which is half the information you need to report the sale of the foreclosed property on your tax return. The other half of the information you need is the purchase date and purchase price; and that information will be found in your escrow statements from when the property was purchased.
Figuring out the "selling price" of the property is a bit complicated. The answer depends on the type of loan. Taxpayers will utilize either the fair market value of the property or the outstanding loan balance on the property for the selling price. Both of these figures are reported on Form 1099-A. The outstanding loan balance is found in Box 2; the property's fair market value is found in Box 4. The date of the foreclosure is indicated in Box 1, and this will be used as the date the property was disposed of (that is, the "sale date"). Taxpayers will also need to know if the loan was a recourse or a non-recourse loan; the loan was a recourse loan if the bank has checked Box 5 which states "If checked, the borrower was personally liable for repayment of the debt?"
People might receive multiple Forms 1099-A (one from each lender) for a single property. People might also receive Form 1099-C instead of Form 1099-A if the lender both foreclosed on the property and canceled any mortgage debt for which the borrower was personally liable.
Gain or loss is reported on Schedule D for homes that were personal residences. As a reminder, the IRS does not allow people to claim a loss on personal residences. Any gain (and I have seen situations where a foreclosure results in gain being reported) on personal residences can be offset by the capital gains exclusion for a main home.
So what do you do with Form 1099-A, exactly? First, if the foreclosed property was your personal residence, the foreclosure will be reported on Schedule D. You'll use the date of the foreclosure (found in box 1 of the 1099-A) as your date of sale. You'll need to indicate the selling price. This will be either the amount in box 2 or the amount in box 4. Which figure you'll use depends if you are liable to repay the loan, recourse loan. If box 5 is checked on the 1099-A, the sale price is the lesser of box 2 or box 5. If box 5 is not checked, the sale price is box 2.  You'll also need to indicate your purchase price or cost basis in the property. That information you should have in your records, usually from the HUD-1 closing statement from when you purchased the property. The difference between the selling price and your cost basis will result in your gain or loss. Gains are taxable, losses personal residences are not tax-deductible.
If the property was  a rental, you'll report the same information as above, but you'll use Form 4797. I advise people who have foreclosed rental properties to seek assistance as there are additional factors to take into consideration, such as recapture of depreciation deductions, passive activity loss carryovers, and reporting any final rental income and expenses.

 IRS CIRCULAR 230 Disclosure:
Under U.S. Treasury Department regulations, we are required to inform you that, unless expressly indicated, any tax advice contained in this post, or any attachment hereto, is not intended or written, to be used, and may not be used to (a)avoid penalties imposed under the Internal Revenue Code (or applicable state or local tax law provisions) or (b)promote, market, or recommend to another party any tax-related matters addressed herein.

Tuesday, November 15, 2011


The IRS form 1099 is used by various entities to report income that they have perceived you have earned. Example: Big Bank issues you a credit card. You run up $2,000 and never pay. After some time Big Bank will issue a 1099 to you. They are also reporting the $2000 as income you have earned, to the IRS. A 1099 can be a blessing because no one else can come after you for the $2,000, the bad side is that now you may have to pay income tax on the $2000.
The IRS requires financial institutions to report to them the amount of principal they charge-off for individual borrowers. It is only to be filed after you have stopped collection activity and there has been no payment activity on the account for three years. This is not a way for financial institutions to try and collect further. It is an added burden on them to track these conditions and find the records when they meet the criteria for filling. The financial institution had written the debt off years earlier.
More information for consumers
If you're receiving one of these, the most common reason is consumer debt, credit cards--banks may also issue 1099-c forms for mortgages,
1.) You have a debt that was never paid, or partially paid, sold to a collection agency who still couldn't collect, etc. Whatever the point is, whoever owns the debt is writing it off as a loss. This is not very common because unless you file for bankruptcy, most collection agencies or banks won't simply "give up" on you. If anything, they'll file for a judgment against you for the debt, interest, collection costs, capitalization fees, etc. It is very unlikely that you're receiving a 1099-C simply because the bank said "ah, lets write this one off." With the problems lenders are having these days, no bank is going to surrender debt as a loss. or,
2.) You had a collection agency or bank hounding you for money. Hopefully you were smart enough to pay them off with a lump sum instead of making payments that merely cover the interest. Anyway, if you were even smarter, you realized that the principal of the original debt (say it was a $5,000 credit card) was like 33% of the amount they were now demanding, and you cut a "deal" to close the case. Well, say it was a $5,000 credit card, they were demanding $13,500, and you gave them $10,000 to call it even. Well, the difference between the "demand" and your "settlement" is considered taxable income by the government. You have to pay income taxes on that $3,500 that you "gained."
Please note--some exceptions do apply. Most commonly, if you were insolvent at the time of the settlement (not bankrupt, insolvent) meaning your current liabilities (loans, debts, bills, etc.) outweighed your assets (income, savings/checking accounts, other assets like house, car etc.) you do not have to pay the tax---the theory being that the debt was written off because you couldn't pay. You must file Form 982 and complete an insolvency worksheet. Be prepared to prove that you are in fact insolvent.
IRS may ask for it. 

IRS CIRCULAR 230 Disclosure:
Under U.S. Treasury Department regulations, we are required to inform you that, unless expressly indicated, any tax advice contained in this email, or any attachment hereto, is not intended or written, to be used, and may not be used to (a)avoid penalties imposed under the Internal Revenue Code (or applicable state or local tax law provisions) or (b)promote, market, or recommend to another party any tax-related matters addressed herein.

Four Facts About Bartering

In today’s economy, small business owners sometimes look to the oldest form of commerce – the exchange of goods and services, or bartering. The fair market value of property or services received through barter is taxable income.

Bartering is the trading of one product or service for another. Usually there is no exchange of cash. However, the fair market value of the goods and services exchanged must be reported as income by both parties.

Here are four facts about bartering that small business owners should be aware of:

1. Barter Exchange A barter exchange functions primarily as the organizer of a marketplace where members buy and sell products and services among themselves. Whether this activity operates out of a physical office or is internet based, a barter exchange is generally required to issue Form 1099-B, Proceeds from Broker and Barter Exchange Transactions, annually to their clients or members and to the IRS.

2. Barter Income Barter dollars or trade dollars are identical to real dollars for tax reporting. If you conduct any direct barter - barter for another’s products or services - you will have to report the fair market value of the products or services you received on your tax return.

3. Taxes Income from bartering is taxable in the year it is performed. Bartering may result in liabilities for income tax, self-employment tax, employment tax, or excise tax. Your barter activities may result in ordinary business income, capital gains or capital losses, or you may have a nondeductible personal loss.

4. Reporting The rules for reporting barter transactions may vary depending on which form of bartering takes place. Generally, you report this type of business income on Form 1040, Schedule C Profit or Loss from Business, or other business returns such as Form 1065 for Partnerships, Form 1120 for Corporations, or Form 1120-S for Small Business Corporations.

 IRS CIRCULAR 230 Disclosure:
Under U.S. Treasury Department regulations, we are required to inform you that, unless expressly indicated, any tax advice contained in this post, or any attachment hereto, is not intended or written, to be used, and may not be used to (a)avoid penalties imposed under the Internal Revenue Code (or applicable state or local tax law provisions) or (b)promote, market, or recommend to another party any tax-related matters addressed herein.

Friday, November 11, 2011

Thursday, November 10, 2011

Tax Benefits Expiring in 2011 & 2012

It's almost the holiday season. Thanksgiving, then Christmas and finally the New Year.  With a New Year we will be getting tax law changes. Unless Congress extends these benefits, they are known to do that, look for your tax bill to go up in 2012 and 2013. 

Major Individual Income Tax Benefits Expiring 12/31/2011:
• Personal tax credits applied against income tax no longer apply
• Higher alternative minimum tax exemptions revert back to extraordinarily-low thresholds
• $250 school teacher expense deduction ends
• Mortgage insurance premium deduction expires
• State and local sales tax deductions expire
• Tuition and related fees deduction end
• IRA to charity tax-free transfers stop
• 2% Social Security tax reduction ends
Major Individual Income Tax Benefits Expiring 12/31/2012:
• Marriage penalty equalization ends
• Dividends taxed at capital gains rates removed, taxed at regular rates now
• Capital gains low tax rates expires
• Removal of itemized deduction phase out for higher income Americans
• Removal of personal exemption phase out for higher income Americans
• Child care deduction limit of $3,000 reverts to $2,400
• Child credit reduces from $1,000 per child to $500 per child
• Low 10% tax bracket for low income Americans is eliminated
• Lower income tax rates and smaller brackets expires
• Refundable adoption credit and reduced deduction
• American Opportunity college education credit expires
• Major reduction in earned income credits and refunds
• Income tax exemption for debt forgiven on home foreclosures and repossessions
• Deduction for student loan interest ends
• Education IRA limit drops from $2,000 to $500

Here's How to Tell the Deals From the Duds at a Dollar Store

Despite their name, 99-cent stores can offer great deals on items like coloring books, notepads, stocking stuffers, baby clothes, soap, and so on.
"The biggest misconception about dollar stores is that they only have junk that no one needs and everything is low quality," says Andrew Schrage of MoneyCrashers, an investment website.
There's too much competition for them not to offer similar products to general stores.
But watch out: Some products should only be bought at a general store. Read through to see if you can guess what's a deal and a dud at the 99-cent store.
DEAL: Pet Toys
Pet toys can stand to get beaten (and eaten) up since they're so cheap, and the store usually has a great selection.
NO DEAL: Batteries and Other Electronics
Some stores sell "gray goods," or products made for a foreign market. Oftentimes they fail to comply with U.S. regulations and as a result, they can be dangerous.
Batteries can be prone to leakage and fail to last as long as name-brand batteries. This means you'll spend more on replacements.
Also be forewarned that some UL labels on electronics and extension cords may say they're U.S. approved when they aren't.
NO DEAL: Domestic Fire Products
Lighters, tiki torches, barbecue makers, and outdoor candles should never be bought from a dollar store. If you do, you might find your house go up in flames like a Hawaiian-themed barbecue.
DEAL: Cookware
Dollar stores stock lots of basic cooking supplies, including pots, pans, spatulas, ice cream scoopers, cheese graters and oven mitts.
You'll save 50 to 90 percent on items, compared to prices at Target, but sometimes these kits will be really dirty, missing pieces, or just flat-out broken. Check to make sure.
NO DEAL: Groceries
Whatever amount you might save isn't worth the risk of eating counterfeit products or food made for international destinations that haven't been U.S. approved.
The merchandise may be also expired: Food-carrying containers sit outside for long periods of time, and temperature changes spoils the food, Terri Gault, founder of, tells MainStreet.
In terms of pricing, grocery stores offer better deals, especially with pre-packaged baking goods and generics. The big box stores are even cheaper when they're having a sale or giving out coupons.
DEAL: Cleaning Supplies
Buy these, especially items like mops, rubber gloves, or sponges. They're the same as what you'd get at the grocery store, just cheaper.
You can also go for liquid cleaners, says Schrage, but oftentimes their formula is diluted and leaves residue.
Also think about buying disposable clean-up items like toilet paper and paper towels. Keep in mind, however, that you may want to buy these toiletries in bulk.
DEAL: Greeting Cards
Dollar stores stock up on lots of good, quality cards, which they sell for cheap. A drugstore like Duane Reade will charge $1.40, but the 99-cent store price comes in at about 50 cents.
DEAL: Party Supplies
As with greeting cards, dollar stores always restock party supplies.
Their merchandise tends to be fun and lively, and most importantly, cheap. They carry everything you need, from hats to plastic plates, cups, and utensils.
NO DEAL: Children's Toys
DO NOT buy these at a 99 cents store. 99-cent store toys are made cheaply so you won't want to risk having a piece breaking off in your kid's throat. Same goes for baby products—avoid them.
Items sold in the dollar stores sometimes bypass U.S. approval, which as we pointed out earlier, could mean high levels of lead and other chemicals. Remember those Chinese Mattel dolls?
NO DEAL: Over-the-Counter Medications
Stay away from vitamins, as the amount of nutrients the label claims is probably faulty. Cheap vitamins also don't dissolve quickly enough for your body to absorb them.
Similarly avoid buying aspirin, ibuprofen, and other over-the-counter meds at a 99 cent store. Independently-owned 99-cent stores have been known to counterfeit these products.
"Suppliers digitally alter a label and scan it into a generic bottle or package," Greg Guila, a lawyer specializing in patent law at the firm Duane Morris, tells MainStreet.
 This article is part of a series related to being Financially Fit.

Tuesday, November 8, 2011

How to Feed a Family for $15 a Day

The average family of four spends upwards of $1,200 a month on food, or roughly $40 a day. But with smart planning and key ingredients, you can learn to bring that expense down to less than $15 a day. Cooking Light contributing editor and host of Yahoo's Blue Ribbon Hunter Allison Fishman stopped by my kitchen recently to show us exactly how, without sacrificing health or taste.
She says it mainly starts with some important prep work. "You can definitely feed a family of four for under $15 a day. The trick is you've got to plan for it. It's called 'intentional shopping,' which means make a menu, make a shopping list and stick to it," says Fishman. "Mapping out your meals can actually save you about 20 percent."
Next, she says, you want to rethink meat since it's the most expensive food item on most grocery bills. "Try vegetarian options once or twice a week," says Fishman. "That can make a big dent in your grocery bill." Or, another option is to stretch your beef, poultry and fish a little further in your cooking. For example, instead of making it the feature food of your meal, use it sparingly for flavor and texture, almost like a condiment. Fishman suggests tossing a small amount of sirloin into a vegetable stir-fry, or throwing a few ounces of shrimp in with a larger pasta recipe. A pound of beef, which costs about $5.99 per pound, can provide dinner for a family of four when sliced up and cooked along with vegetables.
And remember while it's more convenient to buy boneless, skinless chicken breast for $5 per pound, you can save a significant amount when you buy whole chicken and cut it up yourself. This way it only costs a little more than $1 per pound.
Repurposing leftovers is also a great way to save. For breakfast, Fishman likes to mix leftover dinner vegetables with eggs and shredded cheese for a family-sized breakfast scramble, all for just $1.12. For lunch, you can refresh leftover rice and take-out with a little onion and tofu to make a whole new homemade vegetable fried rice for a grand total of $3.13.
Next, opt for cheap, bulk ingredients as the base of your meal from whole grain pasta to long-grain brown rice. Dried beans and legumes are a frugal cook's superstars, says Fishman. "They're great in a variety of recipes and provide tons of protein and fiber. They're also cheap when you buy them in bulk. You'll get five times more beans for your buck compared to canned," she says. "The trick is you'll have to rehydrate them by either cooking them over the stove or in a slow cooker." Once they're ready for cooking, you can make chili, soups, baked beans and all kinds of healthy meals for very little cost. Best part about beans and legumes is that they're filled with protein and fiber so you'll stay full for a longer period of time.
Another bargain food staple is seasonal produce. In the fall, grocers carry tons of squash, citrus and robust greens like kale and chard. When there's an abundance, you'll find them at rock bottom prices, usually about a $1 less per pound.
Finally, one of Fishman's favorite dinner recipes for families, which costs just over $2 per serving: rotini with white beans and escarole. "It exemplifies what eating on a budget is all about. It's vegetarian, it's got pasta, it's got plenty of beans for protein, and it includes seasonal fall vegetables."
This article is part of a series related to being financially fit.

Saturday, November 5, 2011

IRS Gets Better at Catching Fraudulent Tax Refunds

The Internal Revenue Service increased the number of fraudulent tax refund claims it detected and stopped during the 2011 tax-filing season by 171 percent over the previous year.
As of April 30, 2011, the IRS had identified 775,723 tax returns with $4.6 billion claimed in fraudulent refunds and prevented the issuance of $4.4 billion, or roughly 96 percent, of those fraudulent tax refunds, according to a new government report by the Treasury Inspector General for Tax Administration. That represents a 171 percent increase in the number of fraudulent returns identified during the same period in 2010.
“We are working diligently to identify and stop all fraudulent returns and achieved an increase of 171 percent over last year in the number of fraudulent returns identified,” wrote Richard Byrd Jr., the commissioner of the IRS’s Wage and Investment Division, in response to the report. “This was accomplished, in part, by improved identification and screening of prisoner tax returns. We anticipate that our expanded efforts in this area will have a long-lasting and significant impact in preventing the payment of erroneous or fraudulent refund claims.”
The IRS selected 199,854 tax returns filed by prisoners for fraud screening, representing a 256 percent increase compared to last year.
However, the IRS was unable to identify 140,596 taxpayers who erroneously claimed $140.2 million in tax credits due to processing errors. TIGTA identified several problematic credits, including the First-Time Homebuyer Credit, the Adoption Credit, the Nonbusiness Energy Property Credit, and the Plug-in Electric and Alternative Motor Vehicle Credit. In addition, 26,649 taxpayers had their Homebuyer Credit inaccurately processed, $5.8 million in repayment amounts was not assessed, and $675,063 in repayment amounts was erroneously assessed.
The findings were part of TIGTA’s review of the IRS’s performance during the 2011 filing season. The report noted that the IRS received 130.7 million individual income tax returns and issued approximately 98.2 million refunds totaling $277.1 billion during tax season this year.
“Overall, the IRS’s performance during the 2011 filing season has been successful,” said TIGTA Inspector General J. Russell George in a statement. However, he added, “The IRS continues to face challenges relating to First-Time Homebuyer Credit repayments, verification of the Adoption Credit, and several energy-efficiency tax credits.”
TIGTA made 14 recommendations to the IRS. The most significant recommendations were that the IRS ensure that taxpayers TIGTA has identified as erroneously claiming the credits and deductions are entitled to claim them, initiate a recovery program for erroneously paid claims, revise the programming for First-Time Homebuyer Credit repayments, and seek math-error authority for certain credits detailed in the report.
Byrd said that expanded math error authority could enable the IRS to respond more efficiently to fraudulent refund claims, and the IRS and the Office of the Chief Counsel would discuss the merits of obtaining it with the Treasury Department’s Office of Tax Policy. George said he was pleased that the IRS plans to seek math-error authority for several credits that TIGTA found to be problematic.
The IRS disagreed with only two of TIGTA’s recommendations involving the First-Time Homebuyer Credit. For the two disagreed recommendations, TIGTA said it continues to believe the IRS needs to take action related to its recommendation to establish a Homebuyer Credit Entity Section for each taxpayer who received the Homebuyer Credit rather than grouping information by primary and secondary Social Security Number. The report said the lack of IRS action could result in continued problems, with delays in refunds to some taxpayers.
On another issue involving installment repayments, the IRS also disagreed. TIGTA recommended that programming changes be made to prevent tax examiners from increasing an installment repayment amount without increasing the associated tax liability. The IRS disagreed, contending that systemically preventing tax examiners from increasing the installment repayment amount was undesirable because taxpayers may pay more than the required amount. However, TIGTA contended that the issuance of an alert would ensure that tax examiners accurately allocate installment repayments.

Source Accounting Today

Friday, November 4, 2011

What's on Sale in November

Practically speaking, November is the first full month of the holiday season.
What commences with candy and costumes on the last night of October concludes with confetti and champagne corks on New Year's Eve.
No coincidence, then, that November also marks the beginning of serious holiday sales and specials.
"Half of the world of retail is on sale in November, whether it's a 20 percent markdown or 40 percent," says Daniel Butler, vice president of retail operations for the National Retail Federation. "It's a very heavy promotional month."
And November also hosts two of the most highly anticipated shopping days on the annual calendar: Black Friday and Cyber Monday.
This year, small and independent retailers are focusing on the weekend in between the two -- offering special sales, deals and buys. "And I think you'll see that trend grow," Butler says.
Want to get a good deal in November? Here are seven items where you're likely to find some good buys.
TVs and DVDs
If you're in the market for a TV or DVDs, November might just be your month, says Augie Grant, professor at the University of South Carolina and editor of "Communication Technology and Fundamentals."
There are going to be big specials coming on televisions, especially large screens and 3-D TVs, which have not been selling as well as expected, says Grant.
"As we get closer to Christmas, the prices are going to get better and better," he says.
You could save at least 10 percent to 20 percent, Grant says. Look for items such as a fairly simple 32-inch TV (without Internet capabilities or a half-dozen HDMI connections) for less than $250 during November.
"The cheapest time to buy a TV is November and December," Grant says.
You'll find some deals on DVDs, too. With the surging popularity of Blu-ray, movie companies are discounting their traditional-format DVDs to entice buyers and collectors, Grant says.
Look for a lot of popular movies for $5 to $10 during November, with some after-Thanksgiving sales with prices as low as $2 or $3, he says.
Also on the sale table this month: electronic tablets.
As a host of them are introduced to the market, their prices are how they fight for space on the shelves, says Grant. So prices drop.
With the exception of Apple, you can expect to find a selection of tablets in the $200 to $400 range in the stores this month, he says.
Winter Clothing and 2011 Collectibles
Look for markdowns on winter clothing staples such as gloves, hats and sleepwear, says Butler. "These are big items that are promoted in November," he says.
You can save 25 percent to 40 percent. "And that's in all size ranges," he says.
Also on sale: collectible items with the year "2011" on them, Butler says. With two months of the year left, retailers want to move them -- but discounts won't be as deep as what you'll see in December or January, he says.
"You get markdowns of about 20 percent, and you'll find more selection," Butler says.
Holiday ornaments, baby's first Christmas items, and "collectible china or anything with the year on it" are on sale, he says.
Halloween Costumes, Decorations and Candy
Small and independent retailers typically put holiday items on sale after the holidays -- which means anything targeted to October or Halloween will likely carry a deep discount in those stores during the first few days of November, says Carol Schroeder, co-owner of Orange Tree Imports in Madison, Wis., and author of "Specialty Shop Retailing: Everything You Need to Know to Run Your Own Store."
Look for deals on October and Halloween "home decor and things for the dress-up box," Schroeder says.
"Even if the kids don't know what they want to be next Halloween, you can always use some capes and hats for the dressing up in between," she says.
You can expect savings of 40 percent to 50 percent, Schroeder says.
But you have to move fast. Often independent shops can keep this stuff on the shelves only for a few days to the first week of the month, she says.
Halloween candy is on sale at retailers big and small. So if you can use Halloween candy in your holiday baking or for lunchbox treats, it's a good time to buy. And candy corn is just as appropriate for Thanksgiving festivities, she says.
You stand to save "60 percent off, at least," because stores aren't going to carry it over for next year, Schroeder says.
Outdoor Living Items
Remember that fire pit or outdoor living set you really wanted a few months ago? Pick it up now, and you can really get a bargain, says P. Allen Smith, author of "Living in the Garden Home" and host of "P. Allen Smith Gardens."
On items like fire pits and chimeneas (those short, freestanding pottery chimneys with bulbous bases), you could see prices slashed 30 percent to 50 percent, he says.
And other items, such as sling furniture, patio umbrellas, tiki torches, grills and grilling equipment, retailers will "just keep marking them down until they're gone," Smith says.
Big-box retailers are clearing out the summer merchandise and making room for the holiday items, he says. So when it comes to summer merchandise, "they want it gone."
Flower bulbs are another find. Look for discounts of up to 50 percent off, says Smith.
The Stars of the T-Day Table: Turkey and Potatoes
If you're serving turkey for any of your winter holiday festivities, November could well be the best time to buy it, says Chef Frank Terranova, associate instructor at Johnson & Wales University.
This month, look for brand-name frozen birds to sport price tags averaging from 59 cents to 66 cents a pound, he says. For special varieties and heritage birds, you could pay up to $3 a pound, he says.
But after Thanksgiving, expect to see the price of turkey increase 20 cents to 25 cents per pound, Terranova says. So if you plan turkey for any December celebrations or inexpensive meals, it might be "smart to buy that turkey now," he says.
Potatoes and sweet potatoes are another good buy. "They had a good crop this year," Terranova says. And sweet potatoes and Yukon Gold, in particular, "are going to be an exceptional buy," he says.
For both potatoes and sweet potatoes, look for prices that average about $2.40 for a 5-pound bag, Terranova says.
Apples and Squash
Good harvests for some of the root vegetables mean great prices for consumers this month, Terranova says.
Above the ground, apples are a popular pick. "Apples are off the hook," he says.
While Terranova's picking them up for $15 for 15 pounds, not everyone wants to buy bulk.
In smaller quantities, prices are averaging around $1.20 to $1.30 a pound for domestic varieties of apples, while Galas and imports sell for closer to $2 per pound, he says.
And that's a cut of 10 cents to 15 cents a pound from last year, Terranova says.
Another great buy this month is squash.
"One of the biggest things today and most flavorful: butternut squash," Terranova says. "And it's an economical buy." Acorn squash is tasty and affordable, too.
Squash is in season, popular at the Thanksgiving table and about 15 cents per pound cheaper this month, he says.
Don't be afraid to get creative with some of the traditional fall favorites, Terranova says.
With a recent abundance of pumpkins, his students found a great way to prepare them: cut up and broiled, then tossed with heavy cream and some sage to serve over pasta.
The result, says Terranova, was something unconventional and delicious.

This article is part of a series related to being Financially Fit.

Thursday, November 3, 2011

Year-End Tax-Saving Strategies

With the end of 2011 rapidly approaching, it's now officially time to consider making some moves that will lower this year's tax bill. However you don't want to take actions that would increase your 2012 tax bill by more than you would save this year.
In this regard, the key question is whether you will make as much or more money next year. The answer will determine your 2012 marginal federal income tax bracket, which you will need to know to do the best job of planning for the rest of this year.
Sell Loser Stocks Held in Taxable Accounts
Selling loser investments (currently worth less than you paid for them) held in taxable brokerage firm accounts can lower your 2011 tax bill because you can deduct the resulting capital losses against any capital gains from earlier in the year. Plus you can deduct up to another $3,000 of net capital loss (or $1,500 if you are married and file separately) against ordinary income from salary, bonus payments, self-employment activities, alimony, or whatever.
Any excess net capital loss is carried forward to future years and puts you in position for tax savings in 2012 and beyond.
Set Up Loved Ones to Pay 0% Tax Rate on Investment Income
For 2011, the federal income tax rate on long-term capital gains and qualified dividends is 0% for gains and dividends that fall inside the 10% or 15% rate brackets.
While your tax bracket may be too high to take advantage of the 0% rate, you probably have loved ones or family members who are in the bottom two brackets. Consider giving these folks appreciated stock or mutual fund shares. They can sell the shares and 0% tax on the resulting long-term gains. Remember: their gains will be long-term as long as your ownership period plus the gift recipient's ownership period equals at least a year and a day.
Giving away dividend-paying stocks that pay dividends is another tax-smart idea. As long as the dividends fall within the gift recipient's 10% or 15% rate bracket, they will qualify for the 0% federal income tax rate. However be aware that if you give away assets worth over $13,000 during 2011 to an individual gift recipient, it will cut into your $5 million unified federal gift and estate tax exemption ($5.12 million for 2012). However, you and your spouse can together give away up to $26,000 without any adverse effects on your respective exemptions.
Warning: If your gift recipient is under age 24, the dreaded Kiddie Tax rules could potentially cause some of his or her capital gains and dividends to be taxed at the parent's higher rates. That would defeat the purpose.
Convert Traditional IRA into Roth IRA
The best scenario for this strategy is when: (1) your traditional IRA is (or was) loaded with equities and got shellacked by the 2008 stock market meltdown and/or this year's stock market volatility and (2) you expect to be in the same or higher tax bracket during retirement.
If your traditional IRA is worth substantially less than it once was, the tax hit from converting it into a Roth account is also substantially less. That's because a Roth conversion is treated as a taxable liquidation of your traditional IRA followed by a non-deductible contribution to the new Roth account.
After the conversion, all the income and gains that accumulate in the Roth account, and all withdrawals, will be federal-income-tax-free, assuming you meet the requirements for tax-free withdrawals. So you avoid having pay high tax rates on withdrawals taken during your retirement years.
As was the case last year, there is no longer any income restriction on Roth conversions. Even billionaires can do them!
Warning: The special deal for 2010 conversions that allowed you to spread the resulting taxable income over two years (50% in 2011 and the remaining 50% in 2012) is not available for 2011 conversions. You must report all the conversion income on your 2011 return. So if you did a conversion last year and are considering doing another one this year, remember that you would have a double helping of conversion income on this year's return. That could push you into a higher tax bracket and make the idea of a 2011 conversion less attractive.
Give to Charities
For those whose charitable instincts are stronger than the economy, here are two suggestions:
Donate Appreciated Stock to Charity; Sell Losers and Donate Cash
If by some miracle, you have appreciated stock shares (meaning they're currently worth more than you paid for them) that you've owned for more than a year, consider donating them to IRS-approved charities. You can generally claim an itemized charitable contribution deduction for the full market value at the time of the donation and avoid any capital gains tax hit. On the other hand, don't donate loser stocks. Sell them, book the resulting capital loss, and give away the cash sales proceeds. That way, you can generally write off the full amount of the cash donation while keeping the tax-saving capital loss for yourself.
Warning: You must itemize deductions to gain any tax-saving benefit from charitable donations, unless you make them out of IRAs.
Make Charitable Donations Out of Your IRA
Congress restored a provision that allows you to make up to $100,000 in charitable cash donations directly out of your IRA for 2011 — if you'll be age 70 or older by year-end. Such direct-from-IRA donations are called qualified charitable distributions, or QCDs. Donations made in this fashion don't directly affect your tax bill, because QCDs are tax-free and no deductions are allowed for them. However, QCDs count as withdrawals for purposes of meeting the required minimum distribution (RMD) rules that apply to traditional IRAs. Therefore, taxes can be avoided by arranging for tax-free QCDs in place of taxable RMDs, and this advantage is available whether you itemize deductions or not. If your spouse owns IRAs and is over age 70 , he or she is entitled to a separate $100,000 QCD for 2011.

IRS CIRCULAR 230 Disclosure:

Under U.S. Treasury Department regulations, we are required to inform you that, unless expressly indicated, any tax advice contained in this post, or any attachment hereto, is not intended or written, to be used, and may not be used to (a)avoid penalties imposed under the Internal Revenue Code (or applicable state or local tax law provisions) or (b)promote, market, or recommend to another party any tax-related matters addressed herein.