What to do About that 401K???

If you look at the Personal Finance section of the Wall Street Journel today, you will see headlines such as:
"Baby Boomers Find 401K's Fall Short"; "Which Stocks Will Rise?"; "Big Banks Start Charging for Once Free Services!"; "Why Stocks Tanked..."; "What to Do as Colleges Cut Back of Financial Aid"; and "Banks push for Bigger Down Payments!".

What is all that telling us? Well, how about our dollar is getting weaker and is worth less today, so lenders, organizations, institutions and businesses must find ways to cut back in order to survive without actually charging you more! And, sometimes they have to charge more, too! This is not anything new, though. Look back in history as far back a Julius Caesar and you will see how he tried to make his riches go further and how merchants reacted by raising prices.

What is the point of my post, you ask? Well, in a previous post I mentioned an article about baby boomers, getting ready to retire, expressing their frustrations because their retirement account (401K and other qualified plans) was not what they expected it would be at this point in their lives! So, they continue to work..!

One of the things that they may also not have thought about is how much tax they will pay when they begin drawing that money out of their plan! One of my collegues recently wrote an article stating that the Federal Budget Deficit is growing by almost 4 Billion dollars per day! Most of us cannot conceive how much four billion is, never mind a deficit growing by that amount ... per day! He poses the question, where are government officials going to find the money to pay down the deficit? Well, most of us know the answer and safe to say, almost every one of us is not happy with the answer! The government may cut some programs and reduce spending on others, but the old stand by is standing by once again. Enter... Higher Taxes!

So, what happens to the money that you deferred paying taxes on when you put it into your qualified plan? You avioded the tax on the seed amount which you invested each month and now that it has grown, if it has grown... you will not only pay the tax on the amount you withdraw, but you will pay the tax at the going rate when you take the distributions! So, each time the govenment officials decide they need more money, and they increase the tax rate, guess what happens? That money you had put away in your qualified plan is taxed at a higher amount, meaning you get less money from your distributions!

Simply put, it does not have to be that way! I have been Blessed to find another way and share it with my clients, helping them to avoid the pitfalls of the qualified plans. The plans are ingenious, but with few exceptions, ingenious for the government, not for the individual using the plan!

My collegue tells another story about obtaining a loan from your bank. The bank rep says to you, no problem, you are instantly approved and here is the money. When you ask what are the terms and the interest rate, the rep simply states, don't worry about that, the bank is doing well and we don't need the money right now. When we decide on terms and payment, we will let you know! My collegue asks, how many people would take that loan? Well, probably no one, right? His point?... that is exactly what you are doing when you invest in a qualified plan!

So not only did you endure the intestinal fortitude it took with all the market risks you subjected yourself to over the years, but now what money is left is now subject to the going tax rates and you will ultimately pay more tax on the money you managed to save. You also did not have access to it without penalty!

Seeing this more clearly, you are now wondering what are the alternatives. Well, to the right of this post in the right margin, there is an invitation to a Night of Clarity. Click on it and register to learn more about privatized banking! If nothing else, it will be an education that you will never get from your local bank!  you can also watch a two minute video and request additional information. I will be happy to speak to you about banking and how you can insure your financial future!

Has Your 401K / Retirement Investment disappointed?

Many of the Baby Boomers are realizing that for whatever reason, they are not able to retire due to the declining markets, bad economic times or just because they started saving too late! Is that your concern too? I know that for some, it may be that you are going to have to work longer than you had hoped. But it doesn't have to be that way for the younger generation that still has 20 years or more to work... if you start saving now. And, saving in the right vehicle is essential.

History repeats itself, we all know that! So, if we agree with that statement, why would you place your investments at risk when there are alternatives? First, look at the article posted in the Wall Street Journel . Then if you have a 401K, 403B, Traditional IRA, SEP, SIMPLE or 529 plan that has not performed well or for that matter have any other long term investment that is not performing, look at this 2 minute video .

Do not wait until you are two or three years from retirement to do something and don;t wait until your young children are about to enter college. There are ways to help you there too! Read the article and watch the video

Mr. Thordsen has also offered some tips on the Homebuyer Credit!

EIGHT ESSENTIAL FACTS ABOUT CLAIMING THE FIRST-TIME HOMEBUYER CREDIT

FACTS

If you purchased a home in 2010, you may be eligible to claim the First-Time Homebuyer Credit, whether you are a first-time homebuyer or a long-time resident purchasing a new home. The purchaser must have been at least 18 years old on the date of purchase; for a married couple, only one spouse must meet this age requirement. A dependent is not eligible to claim the credit.  

Here are eight things the IRS wants you to know about claiming the credit:

You must have bought – or entered into a binding contract to buy – a principal residence located in the United States on or before April 30, 2010. If you entered into a binding contract by April 30, 2010, you must have closed on the home on or before September 30, 2010.  

To be considered a first-time homebuyer, you and your spouse – if you are married – must not have jointly or separately owned another principal residence during the three years prior to the date of purchase.  

To be considered a long-time resident homebuyer you and your spouse – if you are married – must have lived in the same principal residence for any consecutive five-year period during the eight-year period that ended on the date the new home is purchased.  

The maximum credit for a first-time homebuyer is $8,000, half that amount for married individuals filing separately. The maximum credit for a long-time resident homebuyer is $6,500. Married individuals filing separately are limited to $3,250.  

You must file a paper return and attach Form 5405, First-Time Homebuyer Credit and Repayment of the Credit with additional documents to verify the purchase. Therefore, if you claim the credit you will not be able to file electronically.  

New homebuyers must attach a copy of a properly executed settlement statement used to complete such purchase. Buyers of a newly constructed home, where a settlement statement is not available, must attach a copy of the dated certificate of occupancy. Mobile home purchasers who are unable to get a settlement statement must attach a copy of the retail sales contract.  

If you are a long-time resident claiming the credit, the IRS recommends that you also attach any documentation covering the five-consecutive-year period, including Form 1098, Mortgage Interest Statement or substitute mortgage interest statements, property tax records or homeowner’s insurance records.  

Members of the military and certain other federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and qualify for the credit.

http://sntk.in/0d783507

ARE YOUR SOCIAL SECURITY BENEFITS TAXABLE?

Here is another excerpt taken from Attorney H. Thordsen concerning taxation of Social Security Benefits.

FACTS

The Social Security benefits you received in 2010 may be taxable. You should receive a Form SSA1099 which will show the total amount of your benefits. The information provided on this statement along with the following seven facts from the IRS will help you determine whether or not your benefits are taxable.

How much – if any – of your Social Security benefits are taxable depends on your total income and marital status. Generally, if Social Security benefits were your only income for 2010, your benefits are not taxable and you probably do not need to file a federal income tax return.

If you received income from other sources, your benefits will not be taxed unless your modified adjusted gross income is more than the base amount for your filing status. Your taxable benefits and modified adjusted gross income are figured on a worksheet in the Form 1040A or Form 1040 Instruction booklet.

You can do the following quick computation to determine whether some of your benefits may be taxable:
• First, add one-half of the total Social Security benefits you received to all your other income, including any tax exempt interest and other exclusions from income.

• Then, compare this total to the base amount for your filing status. If the total is more than your base amount, some of your benefits may be taxable.

The 2010 base amounts are:

• $32,000 for married couples filing jointly.

• $25,000 for single, head of household, qualifying widow/widower with a dependent child, or married individuals filing separately who did not live with their spouses at any time during the year.
• $0 for married persons filing separately who lived together during the year.

For additional information on the taxability of Social Security benefits, see IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits. Publication 915 is available on the IRS website. 

http://sntk.in/0d783507

Tax Benefits for Disabled Taxpayers

Here is some additional tax tips for disabled persons, courtesy of Mr. Thordsen's consumer alert!

Tax Benefits for Disabled Taxpayers 

Taxpayers with disabilities and parents of children with disabilities may qualify for a number of IRS tax credits and benefits.  Listed below are seven tax credits and other benefits which are available if you or someone else listed on your federal tax return is disabled.

1.     Standard Deduction Taxpayers who are legally blind may be entitled to a higher standard deduction on their tax return.

2.     Gross Income Certain disability-related payments, Veterans Administration disability benefits, and Supplemental Security Income are excluded from gross income.

3.     Impairment-Related Work Expenses Employees who have a physical or mental disability limiting their employment may be able to claim business expenses in connection with their workplace. The expenses must be necessary for the taxpayer to work.

4.     Credit for the Elderly or Disabled This credit is generally available to certain taxpayers who are 65 and older as well as to certain disabled taxpayers who are younger than 65 and are retired on permanent and total disability.

5.     Medical Expenses If you itemize your deductions using Form 1040, Schedule A, you may be able to deduct medical expenses. See IRS Publication 502, Medical and Dental Expenses.

6.     Earned Income Tax Credit EITC is available to disabled taxpayers as well as to the parents of a child with a disability. If you retired on disability, taxable benefits you receive under your employer’s disability retirement plan are considered earned income until you reach minimum retirement age. The EITC is a tax credit that not only reduces a taxpayer’s tax liability but may also result in a refund. Many working individuals with a disability who have no qualifying children, but are older than 25 and younger than 65 do -- in fact -- qualify for EITC. Additionally, if the taxpayer’s child is disabled, the age limitation for the EITC is waived. The EITC has no effect on certain public benefits. Any refund you receive because of the EITC will not be considered income when determining whether you are eligible for benefit programs such as Supplemental Security Income and Medicaid.

7.     Child or Dependent Care Credit Taxpayers who pay someone to care for their dependent or spouse so they can work or look for work may be entitled to claim this credit. There is no age limit if the taxpayer’s spouse or dependent is unable to care for themselves.

http://sntk.in/0d783507

Five Tax Tips if You Changed Your Name

I receive news alerts and consumer alert information from the Law Offices of Herman Thordsen, an attorney in California who monitors and writes opinions about various points of interest. I received a consumer alert this morning with a few tax tips that may be informative to you. The first part deals with name changes and filing your tax retrun after a name change.  The information is copied from Mr. Thordsen's newsletter.

Five Tax Tips if You Changed Your Name Due to Marriage or Divorce or if you adopt your Spouse’s Children on marriage.

If you changed your name as a result of a recent marriage or divorce you’ll want to take the necessary steps to ensure the name on your tax return matches the name registered with the Social Security Administration. A mismatch between the name shown on your tax return and the SSA records can cause problems in the processing of your return and may even delay your refund.  Here are five tips from the IRS for recently married or divorced taxpayers who have a name change. 
1.    If you took your spouse’s last name or if both spouses hyphenate their last names, you may run into complications if you don’t notify the SSA. When newlyweds file a tax return using their new last names, IRS computers can’t match the new name with their Social Security Number. 
2.    If you were recently divorced and changed back to your previous last name, you’ll also need to notify the SSA of this name change. 
3.    Informing the SSA of a name change is easy; you’ll just need to file a Form SS-5, Application for a Social Security Card at your local SSA office and provide a recently issued document as proof of your legal name change. 
4.    Form SS-5 is available on SSA’s website at http://www.socialsecurity.gov, by calling 800-772-1213 or at local offices. Your new card will have the same number as your previous card, but will show your new name. 
5.    If you adopted your spouse’s children after getting married, you’ll want to make sure the children have an SSN. Taxpayers must provide an SSN for each dependent claimed on a tax return. For adopted children without SSNs, the parents can apply for an Adoption Taxpayer Identification Number – or ATIN – by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions with the IRS. The ATIN is a temporary number used in place of an SSN on the tax return. Form W-7A is available on the IRS website at http://www.irs.gov , or by calling 800-TAX-FORM (800-829-3676). (2011-23

Cute spin on the Super Bowl! Enjoy

Now just because I posted this, dosen't mean I am a Packers fan, but this is funny and worth the read and a laugh. But seriously! I received this from a business associate and am posting it especially for my good friend, Pastor J!

Every Red Blooded American should jump in line to support the Green Bay Packers! The Packers defeated the Chicago Bears last Sunday afternoon, thus earning them the opportunity to go to the Super Bowl. By doing so, they saved the Hard-Working, Red Blooded, Taxpaying Americans literally several million dollars of tax money. How you say? Simple... we were told that if the Chicago Bears had won that President Obama (and probably his family) would be attending the Super Bowl to cheer on his hometown team. Since the Bears lost...the President won't be attending. The money saved from not using Air Force 1, the limousines, all the additional security, and let's not forget Michelle Obama's entourage, is literally several million dollars! Therefore every American should cheer on the Green Bay Packers at the Super Bowl to show them our gratitude. Oh...and let's not forget to thank Chicago Bear's Quarterback Jay Cutler for his role in the Packer's success! With that said...let's circulate this email to everyone we know so they can understand why they should cheer for America's team....the Green Bay Packers!

Seriously, enjoy the game!