http://www.taxact.com/tax-tips/daily-tax-tip.xml Everyone wants to get as much back in their tax refund as possible, but tax laws are constantly added, changed, or updated. The J.K. Lasser Daily Tax Tip, brought to you by TaxACT, provide some insight into complex tax situations and offers helpful advice and guidance. Now that's something everyone can use! The Daily Tax Tip content is provided by America's all-time best selling tax guide, J.K. Lasser's Your Income Tax Guide 2006 by John Wiley & Sons, Inc. Tax advice provided by The Daily Tax Tip shall not be construed as a substitute for the advice obtained or given by a certified tax professional. en-us Copyright 2010 John Wiley & Sons, Inc. Fri, 19 Mar 2010 06:00:00 GMT 5 http://www.taxact.com/tax-tips/daily-tax-tip.xml http://www.taxact.com/images/jk-lasser-rss.gif 88 21 Everyone wants to get as much back in their tax refund as possible, but tax laws are constantly added, changed, or updated. The J.K. Lasser Daily Tax Tip, brought to you by TaxACT, provide some insight into complex tax situations and offers helpful advice and guidance. Now that's something everyone can use! http://www.taxact.com/tax-tips/index.asp?tid=1694 If you are not covered by an employer retirement plan but your spouse is, and you file a joint return for 2009, your individual deduction limit is not subject to the phase-out rule unless modified adjusted gross income (MAGI) on the joint return is between $166,000 and $176,000. Your spouse, who is covered by an employer plan, is subject to the deduction phase-out for 2009 if modified adjusted gross income on the joint return is between $89,000 and $109,000. http://www.taxact.com/tax-tips/index.asp?tid=1694 Fri, 19 Mar 2010 00:00:00 GMT http://www.taxact.com/tax-tips/index.asp?tid=1693 Contributions to a traditional IRA may not be made after age 70 1/2, but contributions to a Roth IRA may be made even if you are over age 70 1/2, provided you have compensation to support the contribution and your income is within the limit allowed under the Roth IRA contribution rules. http://www.taxact.com/tax-tips/index.asp?tid=1693 Thu, 18 Mar 2010 00:00:00 GMT http://www.taxact.com/tax-tips/index.asp?tid=1692 Members of the armed services serving in a combat zone can contribute to either a traditional IRA or a Roth IRA based on their tax-free combat pay. Without this law, members of the military who did not have any earnings apart from the combat zone pay could not make IRA contributions, which must be based on taxable compensation. http://www.taxact.com/tax-tips/index.asp?tid=1692 Wed, 17 Mar 2010 00:00:00 GMT http://www.taxact.com/tax-tips/index.asp?tid=1691 If you have a self-directed traditional IRA and you invest in collectibles, such as art works, gems, stamps, antiques, rugs, metals, guns, or certain coins, you will have to pay a tax on your investment. The investment is treated as a taxable distribution to you in the year you make it. Coins are treated as collectibles, except for state-issued coins or certain U.S. minted gold, silver, and platinum coins. There is also an exception for gold, silver, platinum, or palladium bullion held by the IRA trustee, provided the fineness of the metal meets commodity market standards. If bullion is stored with a company other than the IRA trustee, the investment is subject to the deemed distribution rule for collectibles. http://www.taxact.com/tax-tips/index.asp?tid=1691 Tue, 16 Mar 2010 00:00:00 GMT http://www.taxact.com/tax-tips/index.asp?tid=1690 Fees paid to set up or manage an IRA, and annual account maintenance fees, are not considered IRA contributions provided they are separately billed. They are investment expenses that may be deducted as a miscellaneous itemized deduction subject to the 2% of adjusted gross income floor. However, broker commissions that are paid when you make investments for your IRA are not separately deductible, according to the IRS. They are considered IRA contributions subject to the $5,000 contribution limit ($6,000 if age 50 or older) for 2009. http://www.taxact.com/tax-tips/index.asp?tid=1690 Mon, 15 Mar 2010 00:00:00 GMT http://www.taxact.com/tax-tips/index.asp?tid=1689 Both of the favorable cost recovery rules discussed under exceptions in this section are complicated and you should consult your plan administrator to determine if the exceptions apply and how to make the required calculations. http://www.taxact.com/tax-tips/index.asp?tid=1689 Sun, 14 Mar 2010 00:00:00 GMT http://www.taxact.com/tax-tips/index.asp?tid=1688 If your annuity starting date was in 2009, you must use the simplified method to figure the taxable part of your 2009 payments, unless on the annuity starting date you were age 75 or older and your payments are guaranteed for at least five years. http://www.taxact.com/tax-tips/index.asp?tid=1688 Sat, 13 Mar 2010 00:00:00 GMT http://www.taxact.com/tax-tips/index.asp?tid=1687 If you pay tax on a pension distribution and in the next year the plan determines that there was an overpayment, which you repay, the repayment may be deductible. If the repayment is $3,000 or less, it is deductible as a miscellaneous itemized deduction subject to the 2% floor, which may limit or eliminate the deduction. If the repayment exceeds $3,000, you may claim either a miscellaneous deduction not subject to the 2% floor, or if it would provide a lower tax for the year of repayment, a tax credit based on a recomputation of the prior year tax. http://www.taxact.com/tax-tips/index.asp?tid=1687 Fri, 12 Mar 2010 00:00:00 GMT http://www.taxact.com/tax-tips/index.asp?tid=1686 If no exception to the early withdrawal penalty applies, you compute the 10% penalty in Part I of Form 5329. The penalty is 5% instead of 10% if as of March 1, 1986, you were receiving payments under a specific schedule pursuant to your written election. Attach an explanation to Form 5329 if you are applying the 5% rate. http://www.taxact.com/tax-tips/index.asp?tid=1686 Thu, 11 Mar 2010 00:00:00 GMT http://www.taxact.com/tax-tips/index.asp?tid=1685 The life expectancy tables for figuring your expected return are in IRS Publication 939. http://www.taxact.com/tax-tips/index.asp?tid=1685 Wed, 10 Mar 2010 00:00:00 GMT http://www.taxact.com/tax-tips/index.asp?tid=1684 Payments on a complete surrender of the annuity contract or at maturity are taxable only to the extent they exceed your investment. http://www.taxact.com/tax-tips/index.asp?tid=1684 Tue, 9 Mar 2010 00:00:00 GMT http://www.taxact.com/tax-tips/index.asp?tid=1683 If you can show severe financial hardship arising from a sudden illness or accident, or loss of property due to events beyond your control, and you are unable to obtain funds elsewhere, you may make a withdrawal from your employer Section 457 plan. However, the need to buy a home or pay college expenses does not qualify as an unforeseeable emergency. http://www.taxact.com/tax-tips/index.asp?tid=1683 Mon, 8 Mar 2010 00:00:00 GMT http://www.taxact.com/tax-tips/index.asp?tid=1682 A hardship distribution from a 401(k) plan is not eligible for rollover to an IRA or an eligible employer plan. Your employer will not apply 20% withholding to the distribution, as mandatory withholding applies only to rollover-eligible distributions. http://www.taxact.com/tax-tips/index.asp?tid=1682 Sun, 7 Mar 2010 00:00:00 GMT http://www.taxact.com/tax-tips/index.asp?tid=1681 The regular tax-free limit is increased for certain loans to victims of the 2008 storms in the Midwestern disaster area, and a suspension of certain loan repayments is allowed. http://www.taxact.com/tax-tips/index.asp?tid=1681 Sat, 6 Mar 2010 00:00:00 GMT http://www.taxact.com/tax-tips/index.asp?tid=1680 The substantially equal payments exception to the 10% early distribution penalty is generally revoked if qualifying payments are not received for at least five years. For example, you separate from service when you are age 57 and you begin to receive a series of qualifying substantially equal payments. When you are age 61, you stop the payments or modify the payment schedule so that it no longer qualifies. Unless the IRS permits an exception, the 10% penalty applies to the payments received before age 59 1/2 because the five-year test was not met. http://www.taxact.com/tax-tips/index.asp?tid=1680 Fri, 5 Mar 2010 00:00:00 GMT http://www.taxact.com/tax-tips/index.asp?tid=1679 The 10% penalty on early withdrawals does not apply to the first $100,000 of qualified Midwestern disaster area distributions. http://www.taxact.com/tax-tips/index.asp?tid=1679 Thu, 4 Mar 2010 00:00:00 GMT http://www.taxact.com/tax-tips/index.asp?tid=1678 Your spouse must consent in writing to your waiver of a required annuity and the selection of a different type of distribution. A spouse consent must be witnessed by a plan representative or notary public. An election to waive the qualified joint and survivor annuity may be made during the 90-day period ending on the annuity starting date. An election to waive the qualified pre-retirement survivor annuity may be made any time after the first day of the plan year in which you reach age 35. A waiver is revocable during the time permitted to make the election. http://www.taxact.com/tax-tips/index.asp?tid=1678 Wed, 3 Mar 2010 00:00:00 GMT http://www.taxact.com/tax-tips/index.asp?tid=1677 If you receive a lump-sum distribution that includes appreciated employer securities, you may defer the tax on the net unrealized appreciation (NUA) in the securities. http://www.taxact.com/tax-tips/index.asp?tid=1677 Tue, 2 Mar 2010 00:00:00 GMT http://www.taxact.com/tax-tips/index.asp?tid=1676 Starting in 2010, employer plans must allow a non-spouse beneficiary to make a trustee-to-trustee transfer to an IRA that is treated as an inherited IRA. http://www.taxact.com/tax-tips/index.asp?tid=1676 Mon, 1 Mar 2010 00:00:00 GMT http://www.taxact.com/tax-tips/index.asp?tid=1675 A rollover from an employer plan to a traditional IRA is irrevocable, according to the IRS. At the time of the rollover, you must elect in writing to irrevocably treat the contribution as a rollover. If a qualifying lump-sum distribution is made to you and you roll it over, you may not later change your mind in order to claim averaging even though you were born before January 2, 1936, and the other tests for averaging are met. Before making a rollover, figure what the current tax would be on the lump-sum distribution under the special averaging method. Compare it with an estimate of the regular tax that will be payable on a later distribution of the rolled-over account from the IRA. http://www.taxact.com/tax-tips/index.asp?tid=1675 Sun, 28 Feb 2010 00:00:00 GMT