Grandparents attending graduation ceremonies are a wonderful family tradition. Now a coming tax law change will create another meeting of education and retirement, this time affecting two tax-free savings plans. (Photo by RDNE Stock project) Many of us face a dilemma when it comes to two of the biggest reasons for saving, retirement and education. Do we split our extra income between the two? If so, evenly or with one account getting a boost? Or do we defer one for the sake of the other? The answers will depend on your personal financial and family situations, as well as your... Read more →
Tax planning
The Internal Revenue Service announced last week that during filing season 2024 it will run a pilot program in which some taxpayers will be able to file their returns directly with the tax agency for free. Such no-cost, direct filing has been the tax holy grail. There would be no private software middleman, as is now the case for Free File. All of us could just go to the IRS website and file our taxes. There would be no cost, regardless of our income or filing situation complexity. And unlike the IRS' current Free Fillable Forms, there would be computer... Read more →
Photo by Juan Ramos on Unsplash May is graduation month. It's also graduate gift giving time. Money is always tight for the new diploma recipients (and their families), regardless of whether they've completed high school or college. That's why financial gifts are always welcome. One of those graduate gifts for students looking to continue their school days is a contribution to their 529 plans. And one source of those contributions could be, for older savers, their required minimum distributions. Quick 529 overview: These savings plans, named from the Internal Revenue Code that created them, originally only covered higher education expenses.... Read more →
Inflation has increased the cost of everything, including health care. That's why many people, even before the recent jump in the cost of living, have chosen a high deductible health plan, or HDHP. As the name indicates, HDHPs require enrollees to pay more out-of-pocket costs, aka the high deductible amount, before policy coverage kicks in. However, HDHPs typically have lower monthly premiums than the traditional type of medical insurance. Many individuals, especially those in generally good health, accept the risk of a higher deductible in exchange for the immediate cash-flow benefit of lower premiums. Another part of the HDHP trade-off... Read more →
Photo by Gustavo Fring Millions of Americans are worrying about the damage to their retirement accounts if the United States (aka Congress) defaults on the country's debt. But there's another retirement fear that could put federal and state governments on the hook for trillions more dollars. Many Americans aren't saving enough for retirement, and new research says that if the trend continues unabated, the country could by 2040 face a retirement savings gap and resulting economic burden of almost $1.3 trillion. The federal government would bear the bulk of the saving shortfall, $964 billion. The remaining $334 billion burden would... Read more →
Coastal flooding in a Florida community. (Photo by Barry Bahler via Wikipedia Commons) They may be more than 3,100 miles apart, but residents of counties in California and Florida now have a couple of things in common. They recently were pummeled by major disasters. They now have an Aug. 15 deadline to meet certain federal tax responsibilities. Florida flooding: The Internal Revenue Service is offering relief to those who live or have businesses in the Federal Emergency Management Agency (FEMA) disaster designation are of South Florida that endured tornadoes, severe storms, and flooding from April 12 to April 14. The... Read more →
Some of the world's largest companies are family owned. Yes, we're looking at you, Walmart. But the real backbone of every community is its locally owned and operated businesses. Although they are much smaller, these owners face many of the same challenges as do corporate behemoths that are run by and employ family members. Working with family can be even more fraught when it comes to taxes, since employment tax requirements for related employees may vary from those that apply to other employees. Here's an overview of some common family business tax considerations. Married couples as business partners: For better... Read more →
Homemade Gifts Made Easy May. A short word with many meanings. It's the name of the fifth month of the year. Here in the Norther Hemisphere, it's when springtime comes in fully. That's fitting, since its name comes from Maia, the Greek goddess of spring and growth. The Oxford English Dictionary also says the word is a verb that expresses possibility, as in "that may be true," or permission, as in "may I ask a few questions?" When it comes to taxes, I like to combine the meanings. May is a time of growth and renewal and the possibility of... Read more →
A Cole, Oklahoma, home destroyed by the EF3 tornado that went through McClain County on April 19, 2023. The National Weather Service estimated winds at 152 miles per hour. (Photo by U.S. National Oceanic and Atmospheric Administration via Wikipedia Commons) The Oklahoma City area seems to be a tornado magnet. I'm aware of this unwanted meteorological frequency not just because of my weather fixation and its tax connection, but also because my brother lived in OKC back in 1999 when an EF5 twister destroyed much of the state capital's southern suburbs. Back then, my parents were in Western Oklahoma, which... Read more →
Image by www.epictop10.com via Flickr CC Now that Tax Day is over for many of us, it's time to make some moves for the 2023 tax year and beyond. Well beyond for many is retirement. The Internal Revenue Code offers a variety of tax breaks for savings designated for post-work years. One of the most popular is the individual retirement arrangement, or IRA. IRAs come in two versions, traditional and Roth. Pre-tax money goes into a traditional IRA, and in some cases the contribution is tax deductible. But when you get into your 70s, you must take required minimum distributions... Read more →
Photo by Lachlan Ross Procrastinating taxpayers are rushing to file their returns this Tax Day 2023. Some, however, have extra time. Unfortunately for them, the reason for the delayed filing deadline is not one any of us want. They live or have businesses in areas that were declared major disaster areas. Indiana residents are the latest to join this later Tax Day club. Today, the Internal Revenue Service announced that Hoosier storm victims now have until July 31 to file various federal individual and business tax returns and make tax payments. Yeah, I know getting the word out that Tax... Read more →
Still have tax filing to complete on this last weekend before Tax Day, Tuesday, April 18? The following tips could help you salvage at least some of the coming Saturday, Sunday and, this year, Monday. (Photo by Sincerely Media on Unsplash) Do you have big weekend plans? Or are you going to be working on your 2022 tax return? Here are some tips on this final weekend — plus Monday's extra 24 hours because of Emancipation Day — to help you complete that Form 1040, maybe with enough time to still do what you really want on your days off.... Read more →
The IRS' tax relief for tornado-stricken Tennessee residents and business owners is welcome. But that's just one part of picking up the pieces after a major disaster. Keep reading after the Volunteer State tax specifics for tips that all of us can use to recover, financially and physically, if we ever must cope with a catastrophe. Damage caused by an EF3 tornado that touched down southwest of Covington, Tennessee. Covington is the county seat of Tipton County, one of 10 counties in the Volunteer State that the Internal Revenue Service granted tax relief following the March 31-April 1 tornado and... Read more →
April's flowers are a delight, and you can enjoy them as soon as you finish up the month's tax tasks. (Photo by Eilis Garvey on Unsplash) Welcome to the first full week of April, the month that tends to bring out conflicted feelings in most of us. While most of us are delighted that we can put away our winter coats and enjoy the arrival of spring flowers, April's arrival also means that millions of us still must confront our annual tax filing tasks. If you've yet to file your 2022 return, here are six tax tasks to consider as... Read more →
The IRS' tax relief for tornado-stricken Mississippians is welcome. But devastated residents could use more help. If you want to provide some support, read on for groups that are conducting a variety of recovery efforts in the storm-stricken areas and could use donations to continue their work. The devastation from the March 24-25 tornadoes that plowed through the lower Mississippi River Valley is horrific. A massive EF4 twister that cut a 59-mile path of destruction left 26 people dead. Hundreds of residents and businesses were displaced by the severe storms. The Federal Emergency Management Agency (FEMA) and the White House... Read more →
Photo by Nicola Barts If you turned 72 last year and didn't take your first required minimum distribution (RMD) by Dec. 31, 2022, you have a few days to take the mandatory withdrawal. April 1 is your deadline to take out the specified amount from your tax-deferred retirement savings account(s). This year, however, is the last one for the age 72 RMD trigger. The latest retirement law changes in the Setting Every Community Up for Retirement Enhancement (SECURE) Act 2.0 changed the RMD starting age to 73. However, there's been a bit of confusion about the change. Some people have... Read more →
In 1896, the first college basketball game was played. Now, 127 years later, the hoopla known as March Madness is big business and big betting. The annual NCAA Division 1 college basketball tournaments, both men's and women's matches, dominate the airwaves, with networks paying millions for the broadcast rights. Fans follow on their in-home televisions, as well as on their mobile devices via the internet. Seeding, schmeeding: The wins aren't just important to the teams, the university cities, or the colleges' alums. Bettors have placed millions on the games, and lots of them have already lost big. Upsets busted brackets... Read more →
Photo by Zac Durant on Unsplash The damage Mother Nature can do is long-lasting. So, in the case of many storms, is the clean-up process. The Internal Revenue Service realizes this. Earlier this year, the agency extended original tax relief, including filing deadlines, it provided individuals and businesses in Alabama, California, and Georgia that were hit by major natural disasters. New York storm victims now have joined this group. A deadly winter snowstorm hit parts of the Empire State around last Christmas. The Federal Emergency Management Agency (FEMA) and the IRS followed up quickly with, respectively, disaster declarations and tax... Read more →
Blinders may work for horses, but they're terrible for taxpayers who might miss out on some tax savings. (Photo by Graham Ruttan on Unsplash) The Tax Cuts and Jobs Act's expansion of the standard deduction amounts means even more taxpayers are using that filing method. Most think that since they don't itemize, they don't need to worry about tax breaks. They're wrong. There are the above-the-line deductions, officially known as adjustments to income, that anyone can take (if they qualify), regardless of whether they take the standard deduction or use Schedule A. Then there are some tax credits, again available... Read more →
If you're in your seventies, it's time to start preparing for nest egg withdrawals, some of which are required by federal tax law. A couple of new retirement laws over the last few years, collectively known as the Setting Every Community Up for Retirement Enhancement (SECURE) Acts, have made a lot of changes to retirement plans and the collection of associated taxes. One revision was the bumping up the date when most older owners of tax-deferred retirement accounts must start taking some money from these savings. Starting in 2023, required minimum distributions, known by the acronym RMDs, don't kick in... Read more →