Don't Mess With Taxes

Life is full of things we don't want to do, and tax situations are no exception. Tax filing procrastination and the possibility of putting off forever tax costs connected to the recent banks/state attorneys general deal were the subjects last week at my other tax blog. Five major banks reached a $25 billion deal with the federal government and 49 state attorneys general over alleged foreclosure abuses that helped contribute to the current housing crisis. The agreement would grant relief to homeowners who were foreclosed upon, as well as pay affected homeowners from a $20 billion fund. That generally is... Read more →

Since I didn't win the Mega Millions lottery, I'm back at work. And as a self-employed entrepreneur, the bulk of my work is done from my residential workspace. Once viewed as an audit magnet, a growing number of home-based workers have overcome their tax examination fears and claimed the home office tax deduction. By doing so, we get to write off on Schedule C a portion of our household expenses, including mortgage interest, maintenance, real estate taxes, insurance and utilities. Our home offices also can be depreciated, adding to our tax savings. The pros, cons and a tax surprise connected... Read more →

OK, a tax refund is not nearly as big as today's Mega Millions lottery payout, which has now grown to $640 million. But getting some tax cash back from Uncle Sam is a welcome annual ritual for many folks. Yes, the standard spiel now, which I've given myself over the years, is that you should adjust your withholding so you don't give the federal government a year-long interest free loan of your money. The reality is, though, that a whole lot of people like to use over-withholding as a forced savings account. And with interest rates so low on low-risk... Read more →

Admit it. You bought a Mega Millions lottery ticket. Heck, as you can see from the photo below, we've been buying them for a few weeks. And yes, I am making a to-do list if our numbers come up in the $540 million drawing. Hey, someone has to win. It might as well be me (and the hubby). Taxes and gambling: I know you know that Uncle Sam considers lottery winnings, like other forms of gambling, taxable income. And when a jackpot is this big -- nearly $390 if you take the cash value option -- there's no question that... Read more →

Telecommuting is hailed as the solution for today's modern workplaces. It's ecologically friendly, keeping cars off roads. Yes, more of us still drive to work than take public transportation. It's family friendly, letting employees be there when their kids arrive home from school. And companies can save money by not having to pony up for big offices in areas where business real estate commands top dollar. Now, however, it looks like telecommuters, who themselves could encounter added taxes, also could cost their employers some unplanned tax bills. New Jersey nexus: A New Jersey court has ruled that an out-of-state corporation... Read more →

Does doing your taxes drive you crazy? Then you need to meet Willem Buiter. The chief economist for Citigroup says the U.S. tax code almost gave him a nervous breakdown. Buiter recently appeared on Bloomberg Radio primarily to talk about the European fiscal situation. The discussion, however, eventually returned to American shores and Buiter's dismay with the U.S. fiscal system, including taxes. "I had to try and get the data together to give to the person who prepares my tax returns, and I almost had a nervous breakdown collecting the data," said Buiter, who also described himself as a "victim"... Read more →

Yes, I am a tax geek so I see taxes as part of almost everything. Just ask the poor hubby who has put up with this tendency for so many years. But it's true. Love 'em or mostly hate 'em, taxes are an integral part of everyone's life. We tend to focus on the bad tax implications because that's just how we humans roll. In some situations, however, tax laws are welcome. Find out how in my Bankrate story that I like to call your life on taxes. You also might find these items of interest: Marriage, divorce and taxes... Read more →

With the tax filing deadline rapidly approaching, many folks are considering putting money into a traditional IRA because they can deduct their contributions. But before you do that, take a look at whether a Roth IRA might be a better move, especially for your long-term retirement goals. The table below shows the major differences in these two individual retirement arrangements. Roth IRA Traditional IRA Maximum contribution amounts for 2011 and 2012 tax years $5,000 or the actual amount of earned income; $6,000 if you’re age 50 or older $5,000 or the actual amount of earned income; $6,000 if you’re age... Read more →

Traditional individual retirement accounts, workplace 401(k)s and a variety of self-employment retirement plans allow your investments to grow tax-deferred until you decide to call the 9-to-5 grind quits. As owner of such accounts, your plan (hope) is that you'll be making less money when you retire so your tax rate should be lower when you start withdrawing the funds. In order to keep the retirement fund growing (and delay the tax bill), many account holders put off taking out IRA and similar plan money as long as possible. There comes a time, however, when the IRS says "enough." Uncle Sam... Read more →

Uncle Sam estimates that 70 percent of older Americans will need long-term care services at some point. This isn't for medical care. Rather, long-term care includes services and support to help meet basic personal tasks of everyday life, such as doing housework, shopping for groceries or clothes, preparing and cleaning up after meals, obtaining and taking medications, completing personal hygiene tasks and managing money. To hire someone to help out with these daily duties is expensive and will only get more so. That's why many people buy long-term care insurance. These policies also can take a bite out of a... Read more →

Tonight's the night for fans of the retro cable TV series "Mad Men." After a 525-day wait, we finally get a look at what's been happening in the lives of the folks at Sterling Cooper Draper Pryce. When the program premiered in 2007, it was set in the early 1960s. The fourth season ended in 1965. A spoiler clampdown has left us guessing as to which year Don Draper, Roger Sterling, Peggy Olson et al will find themselves. We do know, however, that the show will remain in the tumultuous '60s. Taxes in the '60s: While there definitely were some... Read more →

Budgeting is critical for both governments and individuals. That financial task was the focus of posts last week at my other tax blog. On the macro budgeting scene, House Republicans revealed their plan for Uncle Sam's fiscal year 2013 budget. One of the major proposals is to collapse the current ordinary income tax brackets from six to just two. The rates would be 10 percent and 25 percent, but there's no word on proposed income ranges. Meanwhile, many individuals are struggling to make their money cover all their bills. In some cases, deals are cut with creditors to forgive some... Read more →

"Is there a 1040 Schedule M form for 2011? I can't find it anywhere. All the Schedule Ms are for 2010 or before," writes blog reader Jeanie. She's not alone in asking this question. I've gotten the same inquiry from a lot of readers. So Today's Tax Tip looks at what happened to Schedule M and the Making Work Pay tax credit for which it was created. The Making Work Pay tax credit is no longer around. That means the Schedule M also is gone. Making Work Pay was replaced in 2011 by the 2 percentage point cut in the... Read more →

Happy second birthday health care reform! It was on March 23, 2010, that Obama signed the Patient Protection and Affordable Care Act into law. Because of the way the measure is structured, only a few of the law's provisions are now in effect. Most of the law's rules will phase in over the next few years if they survive the Supreme Court scrutiny. The high court will hear oral arguments next week on the constitutionality of the law's most controversial component, the individual mandate. And if Republicans gain power following November's election, one of their first moves will be to... Read more →

Signals continue to be mixed in the housing industry. More housing markets across the United States are showing signs of picking up, although most real estate observers caution that the recovery will be long and slow. Home builder stocks have are up dramatically as the annual spring home-buying season begins. But February's numbers on sales of previously owned homes were disappointing. And then there are the folks stuck with underwater mortgages and facing possible foreclosure. That's why, says Rep. Charles Rangel, the Mortgage Forgiveness Debt Relief Act needs to be extended. This law, enacted on Dec. 20, 2007, allows certain... Read more →

On March 21, 1963, the most famous U.S. federal prison slammed its doors for good. Alcatraz Island was home to the first lighthouse on the West Coast. That beacon is still there, but The Rock also housed military installations, was the birthplace of the American Indian Red Power movement and remains a bird sanctuary. Alcatraz Island at dawn via Wikimedia But most of us know Alcatraz for one thing, its infamous penitentiary. The facility could hold more than 300 prisoners and thanks to Hollywood everyone knows about Robert Stroud, the Birdman of Alcatraz. Other famous criminals, however, also spent time... Read more →

Many taxpayers are still waiting for their refunds in part because of processing delays caused by Internal Revenue Service changes designed to prevent identity theft and tax-filing fraud. But a recent investigation by the Government Accountability Office indicates that the IRS also needs to be looking inwardly when it comes to tax data threats. The government watchdog office says that despite "numerous controls and procedures intended to protect key financial and tax-processing systems…control weaknesses in these systems continue to jeopardize the confidentiality, integrity, and availability of the financial and sensitive taxpayer information processed by IRS's systems." Computer hacker photo by... Read more →

There's always talk of revamping the tax code, especially in a presidential election year. But it's going to take some heavy equipment to make any substantive structural changes since the U.S. tax code is huge and keeps growing. How big is it? It's hard to reach a consensus on the exact size of the Internal Revenue Code, but lots of folks have tried. Most notably, Congressional speeches over the years have offered various ways to visualize the enormity of the tax code: "One million words and nearly seven times the length of the Bible" "The income tax code and its... Read more →

The Internal Revenue Service usually issues weekly statistics during filing season. The details include not only how many returns the agency has received and processed, but also the numbers on electronic versus traditional mail filings, as well as the size of tax refunds, directly deposited or snail mailed, that have been issued. Those figures haven't been posted this filing season. The latest individual filing data report on the IRS site is for the week ending Dec. 31, 2011. That the IRS hasn't been forthcoming with 2012 filing season stats is not that surprising given all the trouble the agency has... Read more →

For one year after starting my own business, I paid my own health insurance premiums. The expense was necessary, but close to a budget buster. Heck, the policy I was able to get cost more than the exorbitant COBRA coverage it replaced. So I was thrilled when the hubby got medical benefits via his employer and I was able to tag along on that policy. But there was one good thing about being self-employed and paying for my own medical coverage. I got to deduct the premiums in full on my tax return. Actually, it was an adjustment to income,... Read more →