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TaxMama s TaxQuips Not A Temporary Job

2014-09-23 by Eva Rosenberg

Moving to Nevada Today TaxMama® hears from Dustin in the TaxQuips Forum, who has a very reasonable question. (Let me paraphrase.) “I live in Idaho and just got a construction job in Nevada that will last two years. My wife wants to stay in Idaho near her doctor during her pregnancy. What’s the best way to handle the state residency tax issues?”

 

Dear Dustin,

It appears that you are the principal earner in the family. Since this is clearly not a short-term project, you won’t be able to get the benefit of the travel expenses to a temporary job.

So, establish yourself as a Nevada resident and file your federal tax returns using the Nevada address. You can file a non-resident return in Idaho, with your wife as a resident.

Both Nevada and Idaho are community property states. So, on the Idaho tax return, your wife’s column must show half your income, relevant expenses and deductions.

Mike Reed, EA provides another suggestion. Call the insurance company and ask if there would be a problem if you and your wife live in Nevada and use the doctor in Idaho. After all they are neighboring States. A friend of his did something like this and it worked out just fine.

And remember, you can find answers to all kinds of questions about state tax filing and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]

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Cash Donations

2014-08-19 by Eva Rosenberg

Cash donations Today TaxMama® hears from GuideForThePoor in the TaxQuips Forum, who has an interesting question. “Suppose your deductions are too low to itemize, but you still want to give money to charity. Can you give the money to a friend who does itemize – and have the friend donate it to charity and get the deduction?”

 

Dear Guide,

Sure, you are welcome to give your friend any amount of gift you like, up to $14,000 per year, without needing to file a gift tax return.

Your friend is welcome to give all, or part of it, or even more to any charity that you two select.

In fact, this is an excellent way to help charities.

I often advise people who are not in a position to itemize to give their money or household goods to someone who can use the deduction. Wise move.

Bill Porter, EA warns that once you make the gift to your friend, you have no control over that money. If they decide not to donate it, there’s nothing you can do – except not partner with that friend again.

Rita Lewis, EA suggests that if you are close to itemizing, you can use the bunching technique – making a larger donation every other year. Good thoughts from both Bill and Rita.

And remember, you can find answers to all kinds of questions about donations and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]

Please post all Comments and Replies in the new TaxQuips Forum .

 

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TaxMama s TaxQuips BackDoor IRA

2014-07-08 by Eva Rosenberg

Back Door - IRA Today TaxMama® hears from ET in the TaxQuips Forum, who recently learned about Back Door Roth IRA contributions and wanted to know how they work.

 


Dear ET,

You’re reading articles about contributing to IRAs and then rolling things into a Roth.

What the articles don’t seem to tell you is – you don’t need to open a regular IRA at all.

You can take the $3,000 in your old Fidelity 401(k) and roll it directly into a Roth IRA.
(You don’t need that intermediate step.) Just do it as a trustee-to-trustee transfer.
Do NOT have it hit your own bank account at all.

What are the tax implications? You will pay tax on the $3,000, but no early withdrawal penalties. You must leave the money in there for at least 5 years, to avoid any early withdrawal penalty on the entire rollover.

Your implication is that you are earning too much to qualify for Roth contributions, is that the case? If not, make some contributions directly to a Roth IRA each year.

If you DO earn too much to contribute directly to a Roth, want to make contributions to a regular IRA each year. Then you can roll them over to a Roth and pay taxes on the entire balance, including earnings. Again, same rules apply – leave it there for 5 years.

If the contributions to the IRA are non-deductible (your income may be too high since you are covered by an employer plan), then you can roll over the money to a Roth IRA each year and only pay taxes on the earnings on that regular IRA.

It’s actually quite simple. As long as you leave the money in the Roth IRA for at least 5 years, you will get all the earnings tax-free when you ultimately retire. (Or there are ways to tap into it earlier…but that’s a whole other issue.)

 

And remember, you can find answers to all kinds of questions about Roth IRAs and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]

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TaxMama s TaxQuips Q2 Estimated Tax Due

2014-06-16 by Eva Rosenberg

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Today TaxMama® wants to take a moment to remind you about two key June deadlines. Today – estimated taxes are due. June 30th – the FBAR filing.

Dear Family,

Today, June 16th, your second quarter estimated tax payment is due. If you’re running late and haven’t had time to address this yet, I have good news for you. The IRS has a new Direct Pay system. It allows you to make the payment directly from your checking account – with no fees. So you don’t have to run down to the bank, or to the post office, or…Nor must you pay about 3% to an online payment service and use your credit card.

If you don’t know how much to pay, here are two simple rules of thumb:

1) Self-Employed – pay the IRS at least 30% of your profits for the quarter (April and May). This will cover your 15.3% self-employment taxes and 15% tax bracket. If you’re in a 25% tax bracket – pay the IRS 40%. Pay the state, their tax rate.

2) Income is from investments and pensions – pay the IRS 15% – 25% of your income, depending on your tax bracket. If you’re in a 15% bracket and all your income is from dividends and capital gains, you might not need to pay any estimated taxes.

The next deadline is the FBAR – to report the balance and location of your offshore accounts. This report must REACH the U.S. Treasury by June 30th. It must be filed online. There is need to send any money with this report. But if you don’t file it – and should have, the minimum penalty is $10,000 and goes up from there. Some people don’t realize they need to file. So, please, read today’s MarketWatch article to see if you are affected.

And remember, you can find answers to all kinds of questions about June deadlines and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]

Please post all Comments and Replies in the new TaxQuips Forum .

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Student Loan Interest

2014-06-02 by Eva Rosenberg

Today TaxMDrop Fees - student loansama® hears from Sheronda in the TaxQuips Forum, with this common issue (edited). “Taxpayer paid off her student loan using a home equity line of credit (HELOC)? Is the interest still deductible?”

 

Dear Sheronda and family,

This is a common question. These days, student loans get higher and higher as educational institutions keep raising their fees. It’s hard to get through college without going into debt. All too often, students default on those loans. When they do, the IRS can step in to grab the students’ tax refunds. And you cannot bankrupt student debt anymore.

To make life easier, students and/or their families often take out home equity debt to pay the loan off. The advantages are a lower interest rate – and a longer pay-off period.

The trade-off is that you lose the deduction for the student loan interest. But as Mike Reed, EA points out, the out of pocket cash savings from the lower interest rate far outweighs the tax benefit. In addition, if the HELOC is on the student’s own home, they might be able to deduct all the interest (on a loan of up to $100,000), instead of only the $2,500 deduction available for student loans.

One more way to deal with student loans. There are a variety of government and exempt organization programs that will cancel the loan. This is a tax-free benefit students can get in exchange for providing health or educational services in a variety of off-the-beaten path areas. Think of Dr. Joel Fleishman stationed in Alaska in Northern Exposure.

And remember, you can find answers to all kinds of questions about student loans and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]

Please post all Comments and Replies in the new TaxQuips Forum .

Download the MP3 (0:00min, 3MB) or listen now...

Ask TaxMama
Where Taxes are Fun
TaxQuips
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TaxQuips Forum
Where you can you ask your tax questions
TaxQuips Forum
Where you can you can add your comments



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