Q. I am ready to retire and I have some options on how to take my pension? Which option should I take?
A. First, know what all your options are. Typically, you can take a pension over just your life expectancy called single life or anticipate a benefit that will pay your surviving spouse 100% or 50% of your benefit which will decrease what you would have received under the single life option. If you have a spouse you must consider their survivor needs. You must consider what your cash flow needs will be in retirement. You must understand if you take the single life and die the next day, the present value of that pension is gone and you should have a provision to protect that lost money if you have a survivor depending on that income. Consult with a financial advisor for this very important decision.
IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication, including any attachments, is not intended or written to be used, and cannot be used, for the purpose of 1. avoiding penalties under the Internal Revenue Code or 2. promoting, marketing, or recommending to another party any transaction or matter addressed herein.
Securities offered through Valley National Investments, Inc. - an independent broker/dealer and member FINRA and SIPC.
Friday, July 25, 2008
Friday, July 18, 2008
FAQ FRIDAY - July 18, 2008
Q. You discussed last week, estimated tax payments. My accountant told me to do them but I missed the first two quarters, what should I do now?
A. You can catch up your payments by making them now. You still might have an underpayment problem but at least you will get the payments in sooner than later. Or, if you have wages or a pension or some kind of payment where income taxes can be withheld, you can increase your withholdings to cover the payments due. Withholdings are deemed to have been paid evenly throughout the year while estimated tax payments are only credited when paid.
IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication, including any attachments, is not intended or written to be used, and cannot be used, for the purpose of 1. avoiding penalties under the Internal Revenue Code or 2. promoting, marketing, or recommending to another party any transaction or matter addressed herein.
Securities offered through Valley National Investments, Inc. - an independent broker/dealer and member FINRA and SIPC.
A. You can catch up your payments by making them now. You still might have an underpayment problem but at least you will get the payments in sooner than later. Or, if you have wages or a pension or some kind of payment where income taxes can be withheld, you can increase your withholdings to cover the payments due. Withholdings are deemed to have been paid evenly throughout the year while estimated tax payments are only credited when paid.
IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication, including any attachments, is not intended or written to be used, and cannot be used, for the purpose of 1. avoiding penalties under the Internal Revenue Code or 2. promoting, marketing, or recommending to another party any transaction or matter addressed herein.
Securities offered through Valley National Investments, Inc. - an independent broker/dealer and member FINRA and SIPC.
Thursday, July 17, 2008
FAQ FRIDAY - July 11, 2008
Q. I owed a lot of money in taxes last year and my preparer said I have to pay estimated tax payments. Do I really?
A. Our federal income tax system is basically a ‘pay as you go’ system. If you don’t pay in the taxes you owe during the year, you may owe penalties and interest on the underpayment of taxes. There are exceptions to paying the penalties and interest and some of these exceptions are called the safe harbor rules. From the Internal Revenue Service website:
General RuleYou must pay estimated tax for 2008 if both of the following apply.
1. You expect to owe at least $1000 in tax for 2008 after subtracting your withholding and credits.
2. You expect your withholding and credits to be less than the smaller of;
-90% of the tax to be shown on your 2008 tax return, or
- 100% of the tax shown on your 2007 tax return. Your 2007 tax return must cover all 12 months.
For example, assume your 2007 total tax was $5,000 and you expect your 2008 tax to be $6,000. Your withholding for 2008 is expected to be $1,000 so you will have a balance due of $5,000. According to the above, you will have to have paid in taxes through withholding and/or estimated tax payments equal to 90% of the 2008 tax ($5,000) or 100% of the 2007 tax ($5,000). $5,000 required payment less $1,000 withholding leaves a balance due for estimated tax payments of $4,000 paid in quarterly payments. You can increase your withholdings or make the quarterlies to avoid penalties and interest on underpayment. In this example, you will still have a balance due when you file your tax return of $1,000.
IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication, including any attachments, is not intended or written to be used, and cannot be used, for the purpose of 1. avoiding penalties under the Internal Revenue Code or 2. promoting, marketing, or recommending to another party any transaction or matter addressed herein.
Securities offered through Valley National Investments, Inc. - an independent broker/dealer and member FINRA and SIPC.
A. Our federal income tax system is basically a ‘pay as you go’ system. If you don’t pay in the taxes you owe during the year, you may owe penalties and interest on the underpayment of taxes. There are exceptions to paying the penalties and interest and some of these exceptions are called the safe harbor rules. From the Internal Revenue Service website:
General RuleYou must pay estimated tax for 2008 if both of the following apply.
1. You expect to owe at least $1000 in tax for 2008 after subtracting your withholding and credits.
2. You expect your withholding and credits to be less than the smaller of;
-90% of the tax to be shown on your 2008 tax return, or
- 100% of the tax shown on your 2007 tax return. Your 2007 tax return must cover all 12 months.
For example, assume your 2007 total tax was $5,000 and you expect your 2008 tax to be $6,000. Your withholding for 2008 is expected to be $1,000 so you will have a balance due of $5,000. According to the above, you will have to have paid in taxes through withholding and/or estimated tax payments equal to 90% of the 2008 tax ($5,000) or 100% of the 2007 tax ($5,000). $5,000 required payment less $1,000 withholding leaves a balance due for estimated tax payments of $4,000 paid in quarterly payments. You can increase your withholdings or make the quarterlies to avoid penalties and interest on underpayment. In this example, you will still have a balance due when you file your tax return of $1,000.
IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication, including any attachments, is not intended or written to be used, and cannot be used, for the purpose of 1. avoiding penalties under the Internal Revenue Code or 2. promoting, marketing, or recommending to another party any transaction or matter addressed herein.
Securities offered through Valley National Investments, Inc. - an independent broker/dealer and member FINRA and SIPC.
Friday, July 4, 2008
FAQ FRIDAY - July 4, 2008
Q. Following on the last two weeks’ questions, if I put money into an IRA that ends up being “not” deductible, can I take it back out?
A. You can take it back out no later than April 15 of the year following the contribution. For example, if you put $5,000 into a deductible IRA during 2007 and then discover while doing your tax return in March of 2008 that you didn’t qualify for the deduction, you can still take that money out with no penalties. Consider putting it into a ROTH IRA if you qualify for that. If you leave the money there, you must track the non-deductible amount on Form 8606 for as long as you have any IRA monies. You do not have the option to withdraw it after April 15.
If you have already put money into a deductible IRA for this year and realize now that you won’t get the deduction, contact your custodian to see if you can re-characterize it to a ROTH. There are income limits for this as well.
Have a happy and safe Independence Day! Don't forget, Your Financial Choices will NOT be airing tomorrow due to the holiday! But we're still happy to take your questions! Log onto www.yourfinancialchoices.com to find out how to contact Laurie!
IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication, including any attachments, is not intended or written to be used, and cannot be used, for the purpose of 1. avoiding penalties under the Internal Revenue Code or 2. promoting, marketing, or recommending to another party any transaction or matter addressed herein.
Securities offered through Valley National Investments, Inc. - an independent broker/dealer and member FINRA and SIPC.
A. You can take it back out no later than April 15 of the year following the contribution. For example, if you put $5,000 into a deductible IRA during 2007 and then discover while doing your tax return in March of 2008 that you didn’t qualify for the deduction, you can still take that money out with no penalties. Consider putting it into a ROTH IRA if you qualify for that. If you leave the money there, you must track the non-deductible amount on Form 8606 for as long as you have any IRA monies. You do not have the option to withdraw it after April 15.
If you have already put money into a deductible IRA for this year and realize now that you won’t get the deduction, contact your custodian to see if you can re-characterize it to a ROTH. There are income limits for this as well.
Have a happy and safe Independence Day! Don't forget, Your Financial Choices will NOT be airing tomorrow due to the holiday! But we're still happy to take your questions! Log onto www.yourfinancialchoices.com to find out how to contact Laurie!
IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication, including any attachments, is not intended or written to be used, and cannot be used, for the purpose of 1. avoiding penalties under the Internal Revenue Code or 2. promoting, marketing, or recommending to another party any transaction or matter addressed herein.
Securities offered through Valley National Investments, Inc. - an independent broker/dealer and member FINRA and SIPC.
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