daderay's Blog

Not only is the distribution of wealth grossly uneven, but so is creativity. The same can be said for beauty, imagination, luck, even the grace of loving parents. These are the products of the imperativeness of fortune.

It's hard, it is not fair. But this is the hand which has been dealt. It is the duty of every individual to handle the situation in which we exist. After all, the measure of one's success is not how far one reaches, but by the obstacles that one overcomes.

With the tax filing deadline close at hand, here are the top 10 tips for taxpayers still working on their tax return.

1. E-file your return. Consider filing electronically instead of using paper tax forms. Choosing to e-file is the best way to ensure your return is accurate and complete.

2. Review tax ID numbers. Remember to carefully check all identification numbers on your return. Incorrect or illegible Social Security Numbers can delay or reduce a tax refund.

3. Double-check your figures. Whether you are filing electronically or by paper, review all the amounts you transferred over from your W-2 or 1099.

4. Review your math. Taxpayers filing paper returns should also double-check that they have correctly figured the refund or balance due and have used the right figure from the tax table.

5. Sign and date your return. Both spouses must sign a joint return, even if only one had income. Anyone paid to prepare a return must also sign it.

6. Choose Direct Deposit. To get your refund quicker, select Direct Deposit and the IRS will deposit your refund directly into your bank account.

7. How to make a payment. People sending a payment should make the check out to "United States Treasury" and should enclose it with, but not attach it to the tax return or the Form 1040-V, Payment Voucher, if used. Write your name, address, SSN, telephone number, tax year and form number on the check or money order.

8. File an extension. Taxpayers who will not be able to file a return by the April deadline should request an extension of time to file. Remember, the extension of time to file is not an extension of time to pay.

9. Visit the IRS Web site. IRS.gov has forms, publications and helpful information on a variety of tax subjects, which is available around the clock on the IRS.gov.

10. Review your return .one more time. Before you seal the envelope or hit send, go over all the information on return again. Errors may delay the processing of your return, so it's best for you to make sure everything on your return is correct.

I have assembled some tax tips that may be helpful for some of my fellow BPers. I have included a few highlights of What's New for 2008. If you have a tax related question, or just a question in general, send me a note and I will attempt to give you an answer or steer you in the right direction.


What's New for 2008

Any economic stimulus payment that you received is not taxable but reduces your recovery rebate credit. The recovery rebate credit is figured just like last year's economic stimulus payment with the exception that the amounts are based on the 2008 tax year instead of the 2007 tax year.

Your standard deduction is increased by:
Any state or local real estate taxes paid in 2008, and
A net disaster loss attributable to a federally declared disaster.

Taxpayers with an adjusted gross income over a certain amount may lose part of their deduction for personal exemptions and itemized deductions. The amount by which these deductions are reduced is one-half of the amount of reduction that would have applied in 2007.

You may be able to take the First-Time Homebuyer Credit if you bought a home in the US after April 8, 2008 and did not own any other main home during the 3-year period ending on the date you bought your home. If the home is bought in 2009 before July 1, the credit can be taken on either your 2008 or 2009 return.
 

 

Tax Tips

Low- and moderate-income workers can take steps now to save for retirement and earn a special tax credit in 2008 and the years ahead, according to the Internal Revenue Service. The saver's credit helps offset part of the first $2,000 workers voluntarily contribute to Individual Retirement Arrangements (IRAs) and to 401(k) plans and similar workplace retirement programs. Also known as the retirement savings contributions credit, the saver's credit is available in addition to any other tax savings that apply. Eligible workers still have time to make qualifying retirement contributions and get the saver's credit on their 2008 tax return. People have until April 15, 2009, to set up a new IRA or add money to an existing IRA and still get credit for 2008. However, elective deferrals must be made by the end of the year to a 401(k) plan or similar workplace program, such as a 403(b) plan for employees of public schools and certain tax-exempt organizations, a governmental 457 plan for state or local government employees, and the Thrift Savings Plan for federal employees. Employees who are unable to set aside money for this year may want to schedule their 2009 contributions soon so their employer can begin withholding them in January. The saver's credit can be claimed by: (1)Married couples filing jointly with incomes up to $53,000 in 2008 or $55,500 in 2009; (2)Heads of Household with incomes up to $39,750 in 2008 or $41,625 in 2009; and (3)Married individuals filing separately and singles with incomes up to $26,500 in 2008 or $27,750 in 2009. Like other tax credits, the saver's credit can increase a taxpayer's refund or reduce the tax owed.

If you file Form 1040 and itemize deductions, you may deduct medical expenses that are over 7.5% of your adjusted gross income. Careful planning may allow you to plan ahead so that you can take more medical deductions during one year instead of spreading them over two years. For example, schedule and pay for routine doctor or dentist appointments by December 31 instead of early in the next year. If you pay your bill by loan or credit card, it is considered paid for tax purposes.

The IRS allows a credit for a percentage (50%, 20%, or 10%) of up to $2,000 of contributions you make to an employer elective deferral plan or IRA. You must be 18 or older to claim the credit. In addition, you cannot be a full-time student or be claimed as a dependent on someone else return. Any distribution taken from a retirement plan in the prior two years, in the current year, or anytime up until the due date of the current year return will reduce the credit. The credit is in addition to any deduction or exclusion for the contribution.

When you use a car for business, you may deduct mileage expenses by using either the standard mileage rate or the actual expenses of running the car. Actual expenses include such items as gas, oil, insurance, tires, licenses, tags, and repairs. If you elect to claim actual expenses when you first begin using the car for business, you must use this method for the entire tax year. You cannot change to the standard mileage rate deduction.

Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes. Beginning Jan. 1, 2008, the standard mileage rates for the use of a car (including vans, pickups or panel trucks) will be:
50.5 cents per mile for business miles driven;
19 cents per mile driven for medical or moving purposes; and
14 cents per mile driven in service of charitable organizations.
The rate will increase to 58.5 cents a mile for all business miles driven from July 1, 2008, through Dec. 31, 2008.The new six-month rate for computing deductible medical or moving expenses will also increase by eight (8) cents to 27 cents a mile, up from 19 cents for the first six months of 2008. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile. You may also deduct any out of pocket expenses related to performing duties for the charity.

Your filing status is determined by whether you are married or unmarried on December 31 of the tax year. If you live apart from your spouse and meet certain criteria, you may be considered unmarried for the entire tax year. If you were married on the last day of the year, you are considered married for the tax year. If you are divorced under a final decree by the last day of the year, you are considered unmarried for the entire year.

If you are single or considered unmarried for the year, check to see if you qualify for the Head of Household filing status. This filing status may qualify you to take a higher standard deduction, possibly resulting in a lower tax bracket, and may even qualify you for the Earned Income Credit.

If you are married, you may file Married Filing Jointly or Married Filing Separately. If you file a joint return, you must report your combined income and deduct your combined allowable expenses. You may file a joint return even if only one spouse had income.

Certain types of nontaxable income are not used to determine your taxable income. These include child support payments, military allowances, veterans' benefits, welfare benefits, and workers' compensation. A cash rebate received for the purchase of a car is also not considered taxable income.

A deduction of up to $2,500 may be allowed for amounts paid for interest on qualified student loans. Only the actual amount of interest paid in the current year may be deductible. You may not claim the deduction in any year in which another taxpayer claims you as a dependent. You need not itemize to claim this deduction.

If you have an early withdrawal from an IRA and use the money to purchase a first home for yourself, your children, or your grandchildren, you will not be subject to the 10% penalty on early withdrawals. This exception also applies if the money is used to pay higher education expenses for yourself, your spouse, your children, or grandchildren.

If you change jobs during the year and have reached the maximum income amount subject to Social Security tax on your first job, you will have to pay Social Security tax at your new job. You may claim the excess social security tax paid as a credit on your 1040 return.

Contributions to a Qualified Tuition Program (QTP) allow you to prepay a student's college tuition or contribute to a higher education savings account. The contributions are not deductible, but the distributions will be tax-free if the distributions are used to pay for qualified higher education expenses.

Roth IRAs can be used as a savings tool for education. Money in a Roth IRA can be used to pay tuition. If you take out more than you originally contributed and use the money for qualified education expenses, you will pay tax on the earnings, but there is no penalty on early distributions.

There are instances in which multiple people contribute to the support of an individual, and not one person contributes more than half of that individual's support. When this happens (provided the other exemption tests are met), you may agree that either of you who individually provides more than 10% of that person's support can claim the exemption for that person. Note that only one person is able to claim this exemption.

If you receive property as a gift, you should know two things: 1.) the value of the property at the time the gift was given and 2.) the donor's basis in the gift. Your basis will be the lower of these two figures.

A gain on the sale of property used for personal purposes is taxable as a capital gain. A loss on the sale of property used for personal purposes is not deductible.

The sale of inherited property is always long-term, regardless of when the property was purchased or how long it was held. The taxpayer's basis is usually the value of the property on the decedent's date of death.

You may give a gift of money or property to another person without any tax consequences provided the amount does not exceed $12,000 per year. If this amount is exceeded, it must be reported on a gift tax return.

If you have filed your return and later realize that you may have omitted income or deductions, you may amend your return by filing Form 1040X, Amended US Individual Income Tax Return. As a general rule, you must file your amended return within three years of the date you filed the original return. You cannot change your filing status from Married Filing Jointly to Married Filing Separately after the due date of the original return.

Certain amounts received by employees from an employer-sponsored accident and health plan for personal injuries or sickness are excluded from the employee's gross income.

You may deduct unreimbursed amounts you pay for alcohol or drug treatment programs as a medical expense. The cost of smoking-cessation programs is also deductible.

If you are seeking a job in your current profession and itemize your deductions, certain expenses may qualify as miscellaneous deductions. Such items include, but are not limited to employment agency fees, resumes, phone calls, and mailing costs.

If you purchased a computer or a cellular phone for business, you may be able to claim a depreciation deduction. Your employer must require you to have the phone or computer as a condition of employment, and they must be used at the convenience of your employer. You must keep a written record of the personal and business use of the computer or phone to establish the percentage of business use.

If you have business-related entertaining costs, you may be able to deduct 50% of the amount. The expense must be considered necessary or ordinary to your line of business.

Cosmetic medical procedures are generally not deductible. However, they may be deductible if the procedure is required to correct a deformity caused by an accident or disfiguring disease.

Homebuyers are allowed to deduct seller-paid points as an itemized deduction. Points paid by the seller, including points charged to the seller, are treated as paid directly by the buyer from funds that have not been borrowed.

If you pay for a weight-loss program because you are obese, you may deduct the cost as a medical expense. You cannot deduct the cost of low-calorie foods that are a substitute for the normal food that you eat, but you can deduct the cost of food if it alleviates or treats an illness, and the need for the food is verified by a physician.

If you receive rent for your primary residence for two weeks or less each year, you are not required to report income or expenses from the rental.

When computing your basis in stock sold this year, include your dividend income that was automatically reinvested into shares since the time of purchase. This and any fees involved with the purchase of shares are considered cost and will reduce your capital gain.

Tax preparation fees or audit representation fees are generally deducted on a Schedule A as miscellaneous itemized deductions subject to the 2% AGI (Adjusted Gross Income) limitation. Fees directly related to preparation or audit representation of Schedules C, E, and F are fully deductible on those schedules as business expenses.

Scholarship prizes won in a contest are not scholarships or fellowships if you do not have to use the prize for educational purposes. You must include these amounts as income on Form 1040 line 21, regardless of whether they are used for educational purposes.

You can avoid paying taxes on the first $250,000 ($500,000 if married) of profits from the sale of a home if you own and live in the home at least two of the last five years. You may still be entitled to a prorated exclusion amount in certain situations (for example, if you move because of your job or become disabled).

You may authorize the IRS to discuss your return with a friend, family member, tax preparer, or other person you choose. Check the "Yes" box in the Third party designee area of your tax return and provide the required information to authorize this.

Generally, if a debt you owe is canceled or forgiven, other than as a gift or bequest, you must include the canceled amount as income. There is no income from the canceled debt if it is intended as a gift to you. Canceled debt would include an agreement with a loan company to pay a certain portion of the balance. The unpaid portion is "forgiven" and therefore considered "cancelled."

If you get married and decide to change your name, be sure that you notify the Social Security Administration. You must have a valid social security number for each person included on the tax return to electronically file with the IRS.

U.S. citizens and resident aliens are taxed on their worldwide income, regardless of the source of the income. Non-resident non-citizens (non-resident aliens) generally are subject to U.S. income taxation on only their U.S. source income.

By filing an extension, you may be able to postpone filing your return until October 15. However, if you do not pay any portion of the taxes due by April 15, you will accrue penalty and interest charges. Complete Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return to request a six month extension.

If you have a balance due to the IRS but cannot pay the balance in full April 15, consider the IRS installment plan. Complete Form 9465, Installment Agreement Request, and attach it to the front of your tax return. Once approved, you will be charged a fee and interest on any unpaid balance. Make your payments large enough so that the balance due will be paid by the due date of your next tax return.

It is a good idea to keep your previous tax returns, as well as any supporting document that have affected your income or deductions for at least three years. If you need a copy of a prior year return, for a fee you may obtain it from the IRS by filing Form 4506. You can also obtain a transcript of a prior year return free of charge by filing Form 4506T.

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True or False...almost all wellness deficiencies are part of the normal aging process. There's nothing you can do about it.

True or False...all required nutrients are obtained from your average daily food intake, therefore supplementation is a big waste of money.

The answers? False and False!

There are two major problems with the current food supply, they are:

-We eat too much...estimates are that 61% of the population is overweight, and
-We are not getting the minimum amounts of the building blocks (nutrients) that our bodies need for good health.

 

Have you had your spinach today?In 1948 you could buy spinach that had 158 milligrams of iron per hundred grams. By 1965, the maximum had dropped to 27 milligrams. In 1973 it was averaging 2.2. That means you would have to eat 75 bowls of spinach to get the same amount of iron that one bowl might have given you back in 1948. We have to have cobalt to process vitamin B12. We need vitamin B12 for healthy red blood cells. Sadly most of the vegetables that supply cobalt in the diet now test zero.

The top soil over most of the land used to grow fruits and vegetables is very depleted. This in turn produces crops that are severely low in the necessary vitamins and mineral that our bodies need for optimum health.

The typical daily diet does not supply the necessary proteins, vitamins and minerals to properly replace the dying cells in our internal and external organs. If we fall short our immunity system is weakened leaving us vulnerable to sickness and disease.

So...are you getting the 20 essential amino acids, 14 essential minerals and 13 essential vitamins in your daily diet to insure your "good health"?

Who's looking out for your health? Our fast paced lifestyles have prompted the food industry to produce products that satisfy consumer demand. As a result, these quick to prepare processed foods do not contain the proper nutrients to maintain good health. The fresh food part of our diet is totally eliminated and is replaced with high calorie low nutrient substitutes that promotes weight gain. Too often the consumer purchases food based on price, taste and convenience.

Mass media advertising promotes the processed foods that the food industry is offering. This advertising over shadows conventional education which is grossly lacking. Today a person can go through the entire educational system and not have one class in nutrition.

Easy access to "sickness care" (more commonly known as health care) and employer supported health insurance has promoted a mind set that the doctor is responsible for the health of the entire family.

Governmental support of public health is dictated largely by the food and medical lobby. Their agenda is for large sales and profits which most times do not line up with prevention, wellness and sensible diets.

Pay for good health today, or pay for bad health tomorrow! Take control and responsibility for you and your family's health. The first step is to insure they get the basic nutrition through proper diet and exercise. It is almost impossible to get a daily balanced diet so the logical answer is to allocate a portion of your food budget to include a supplement product that supplies the recommended daily minimums. This should not be looked at as an additional expense but part of your grocery list of required items.

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Veriuni's Advanced Antioxidant formula helps to combat the harmful free radicals that enter the body through the food we eat and the air that we breathe. This product is a highly concentrated natural extract derived from grape seeds. It contains a number of unique beneficial flavonoid compounds which have demonstrated many times the antioxidant activity of vitamins C and E in in-vitro studies. They act as free radical scavengers, help resist blood vessel and skin damage, inhibit inflammatory enzymes and inhibit histamine formation.

Veriuni Super 25 offers the most complete daily supplement, with 25 essential vitamins, minerals, and antioxidants. This vitamin is designed specifically to bolster immune systems. It contains unique ingredients and is loaded with the powerful antioxidant CoQ10, which plays a critical role in the production of energy within each cell in the human body and can help promote weight loss. More than just an antioxidant, CoQ10 can also help your body combat diabetes, gingivitis, congestive heart failure, and other diseases; stimulate your body's metabolism to promote weight loss; and much more.
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U.S.News & World Report
Wednesday July 2, 3:17 pm ET By Kimberly Palmer

Rising gas prices are inspiring drivers to find new ways of protecting themselves against future increases--including buying gas in advance and investing in stocks that tend to rise along with the price of gasoline.
One new company, MyGallons.com, lets customers buy gallons ahead of time based on the current prices in their area--in theory, locking in a lower price--and then redeem those gallons at a later date, regardless of any price increases in the interim.
Consumers can also invest in oil companies, coal companies, and other stocks that are likely to benefit from more expensive oil. "Look for companies that will benefit indirectly from oil prices and directly from increased energy efficiency," says Paul Larson, editor of Morningstar StockInvestor. That way, he says, consumers can balance higher expenses at the pump with higher returns on their investments.
At MyGallons.com, the company makes those investments itself. Founder Steve Verona says that the company protects itself against future gas price increases through taking positions in the stock market. That way, customers can enjoy the simplicity of purchasing and redeeming gallons for an established amount and avoid experiencing market fluctuations themselves. Verona says the company doesn't plan to make money on gas, but rather from the annual membership fee (about $30), the interest float on the money that is paid before the gas is redeemed, and advertising on its website.
For consumers interested in hedging their own bets, one option is investing in oil companies. "When gas prices go up, generally oil prices have gone up, and that raises [oil companies'] revenue," Larson says. He also suggests looking for companies that benefit indirectly from rising oil prices, such as railroads, which are a more energy efficient way of moving cargo over long distances than trucks. "That's why railroads are doing so well today," Larson adds.
Oil exploration companies such as Southwestern Energy also offer a way of protecting oneself against future gas price increases, says Peter Cohan, president of a management consulting and venture capital firm that bears his name. In addition, he recommends coal companies, including Walter Industries, Arch Coal, and Peabody Energy, since coal can be used as an energy source instead of oil. Alternative-energy companies, on the other hand, tend to be overvalued right now, Cohan says, and he advises staying away from them.
Of course, gas prices could come down, which could turn any of these investment ideas into losing propositions. As with all investments, says Tim Maurer, director of financial planning for Financial Consulate, a Baltimore advisory firm, consumers need to be prepared to stomach volatility. In fact, his firm has recently limited its exposure to oil in expectation of a short-term market correction.
If prices do indeed fall, then what will happen to MyGallons.com customers' prepurchased gallons? Verona says most people will simply hold on to them until prices go back up again.
But what if prices are currently at their peak and don't go up again? Verona says that's unlikely. "Very few analysts expect prices to come down...because current demand is increasing, while supply has stayed steady. We're talking years, if not decades, before [proposed] solutions have any impact. In the interim, prices should continue to rise," Verona says. He adds that if customers opt to drop out of the program, they can get a refund for their purchased gallons.
Still, the simplest way to protect oneself from rising gas prices, says Charlie Ober, vice president at T. Rowe Price and manager of its New Era Fund, is to drive less, plan vacations closer to home, carpool, and drive more fuel-efficient vehicles. "I think as a consumer, you're going to have to get used to a world of higher gasoline prices," he says, "and that is potentially a lifestyle-changing event."