Retirement Savings Contribution Income Tax Credit of up to $2,000

You may be able to take an income tax credit of up to $1,000 (up to $2,000 if filing jointly) if you make an eligible contribution to an employer sponsored retirement plan or an IRA. This credit is a nonrefundable tax credit. A nonrefundable credit cannot exceed the amount of the tax liability. This credit is in addition to any IRA contribution or contributions that you may make to a qualified plan

Where to Find the Credit – The credit is calculated based on your adjusted gross income and the your filing status. The IRS issued a tax table that indicates applicable percentages ranging from 10% to 50% to for the amount of the credit.

Eligibility To obtain this credit, the following conditions must be met:(1) You must have made a contribution to an IRA or qualified retirement savings plan. (2)You must be at least 18 years old as of December 31, 2009. (3) You cannot be claimed as a dependent by another person. (4)You cannot be a full-time student. (5) You had to be born before January 2, 1992. (6) Your adjusted gross income cannot be greater than $27,750 if single, or $41,625 for a head of household or $55,500 if married filing jointly if married filing jointly.

Limitations to the Credit – Usually distributions decrease eligible contributions. In this connection, contributions taken in determining the credit must be reduced by distributions received over a definite period of time, which the IRS considers as the “test period”. The current tax year, the following tax year up to the due date of the tax return including filed extensions, plus the two preceding tax years consist of the “test period”. Though, trustee to trustee transfers and rollover distributions do not offset the amount of the credit.In addition distributions from a military retirement plan do not reduce the credit.

When to Claim the Credit You can claim the credit on Form 8880, Credit for Qualified Retirement Savings Contributions. You can only claim the credit if you file Forms 1040 or 1040A. If you normally file Form 1040EZ then file Form 1040 to claim this credit. If you file your 2009 tax return claiming an IRA contribution that will be made in 2010, in that case the IRS permits you to consider that contribution as long it is being before the filing date of your tax return in the subsequent year, 2010 as an allowable contribution to determine the amount of this credit. The credit amount of the retirement savings contribution credit claimed by you cannot be greater than your income tax liability less foreign tax credits plus alternative minimum tax liabilities.

This article is not intended to be legal or accounting advice. Tax laws are complex, change constantly and each situation is unique. The reader is advised to do his or her own due diligence and consult competent professionals in these areas.

Learn more about how we can help you determine if you are eligible for the retirement savings tax credit and other new IRS tax credits and about our reasonably priced paperless and internet based system to tax preparation at affordable prices. Sandor(Sandy) E. Lenner,C.P.A. – M.B.A. has provided business and accounting services for over 35 years and works part-time at his wife’s CPA firm .

Taxation, Money And Banking, With The Infinite Banking Concept By Becoming Your Own Banker

Money is an asset! Try living a week to 10 days without it and you will appreciate just what an asset it really is. But most people do not treat money like an asset and therefore they destroy moneys best quality. You see money treated as an asset multiplies exponentially.

Someone once said, “The value of an asset increases exponentially while the value of your labor only increases incrementally.”

Most people are concerned about the rate of return on their money when they should be concerned about the return of their money. And so they lose the real value of their money by giving it to someone else.

Think about this:

Your paycheck. Where do you deposit it?

A commercial bank or one that you own?

Do you or someone else profit the most from this way of doing business?

It has been written that “you can’t multiply wealth by dividing it.” Habitually letting others have first right to your money by depositing your paycheck into their bank, gives them control over your money and not you. This will wind up costing you thousands of dollars, if not more, over time. Each time you give up management of your money to someone else you lose wealth. When you allow others to manage your money your money now can be subject to account charges, service fees and management fees. Plus the managers of your money will make money off your money and pay you very little in comparison to what they are making.

You must read the book about the Infinite Banking Concept entitled Becoming Your Own Banker. It will allow you to control and profit from the financial equation which is:

You give up interest you could have earned by paying cash or you lose money by paying someone else interest when you use their money. You lose money regardless.

But when you practice the Infinite Banking Concept, you can pay cash for your purchases and earn the interest that banks or finance companies would have otherwise earned off you. This is because you are now using your money as an asset and the growth becomes exponential when compared with what happens when you put your money in a bank owned by someone else, or with an investment firm.

Tom McFie PhDis a professional financial coach and is widely known for helping people recover the money they currentley spend. Don’t Make another payment until you have viewed his Infinite Banking Video Then Contact him he can help you Grab a totally unique version of this article from the Uber Article Directory

Know The 60 Day Rule For 401k Rollovers

It is often difficult what option you should use to get your funds out of your existing 401k account. One of the major stresses of this process is the uncertainty of what exactly you should be doing. Add this stress to already existing stress of managing your retirement account and the whole process can be rather overwhelming.

Because of the importance of this decision, it is critical that you take the necessary time to research and explore the different options you have to make this 401k transfer. Consulting your financial consultant or tax advisor is always a good idea.

A good financial advisor can direct you towards the type of retirement vehicle that will be best for your account. You can transfer your account to another 401k, a Roth IRA, a traditional IRA, or other retirement vehicle. Your advisor will also know the latest tax laws you should be aware of.

The Internal Revenue service had complicated the rules for 401k rollovers, making the transfer rather daunting for the average investor. One of the more burdensome rules they have implemented is called the 60 day rule.

The 60 day rule is in reference to the allocated time available to transfer the funds out of your existing account into your new retirement account. Once you have determined to transfer your 401k, they expect you to take care of the transaction. You should be prepared to make the decision and take action on the account.

Despite the simplicity of this rule, the tax implications of it are very present. The best way to avoid this penalty is to determine where the funds are going well before ever transferring them in the first place. A good advisor will help you get your ducks in a row before making the transfer. This allows you sufficient time to fill out everything that is required to move the funds.

Don’t assume that the IRS will be lenient on this rule whatsoever. Even cases involving the transfer happening a day or two late have been rejected by the IRS. They are notorious to sticking to this deadline.

The only scenario in which the Internal Revenue Service is willing to consider a late transfer is in the case of unusual personal circumstances. These include death, disability, hospitalization, and incarceration. This compassion ruling is not really a good substitute for getting your transfer done in time, and is often associated with a fine for the waiver. The fine is wholly dependent upon the size of the transfer between accounts.

Roger Harrison is an experienced financial planning enthusiast that has extensively studied how to do a 401k ira rollover and the best ways to transfer your money. Visit him online at the The 401k Rollover Guru for more information on these and other related topics.

How Variable and Fixed Annuities Work

Investors purchase their annuity product by paying a lump sum of money or a number of periodic payments to an insurance company. The insurance company then provides the individual with tax-free growth of their funds. The rate in a fixed account annuity can be guaranteed for a certain period of time.

The account value in a variable annuity will change depending on how well the portfolio performs. The annuity can only be invested in specific investment types and can change between fixed investments to common stock arrangements.

Starting at the date of the distribution, if the investor chose the life annuity options, they may be able to take distributions for the remainder of their life.

There are a number of different options that determine the eventual size of the payments each period. The account value, distribution length, number of beneficiaries, and interest rate all determine the size of the payment.

There are various policy options that may allow you to extend the life on the contact beyond the life of the account holder. With the right options, your children or spouse may be able to continue your options for the rest of your life.

Investors should consider the investment objectives, risks, charges and expenses of variable annuities and their underlying funds carefully before investing. The prospectus contains this and other information and should be read carefully before investing. The prospectus can be obtained from the financial representative offering the product.

As a result of the account value increasing during the accumulation phase, the growth is not taxable until the distributions are made. This provides the account owner with some very beneficial account growth.

The part of the annuity that is makes it an insurance product is partly due to the guaranteed monthly income payments for the duration of your life (or specified period). This can significantly lower the stress of allocating retirement income. Additionally, if you should happen to die before the contract expires; your heirs may be able to receive the remainder of the account up to the value of the premiums paid in.

It is important to understand that certain actions outside of the design of your account may result in penalties, additional charges, or penalties that can affect the account value. Be certain that you have read the prospectus thoroughly and understand the ins and outs of the annuity contract. You do not want to be caught unawares of certain provisions and chargebacks.

The world of fixed index annuities can be rather complicated. To get more details on this type of investment, be sure to visit Luke Murray at The Fixed Annuity Guide.

Fixed Income Annuity Provides Tax-Deferred Growth

A common concern many people have regarding fixed income annuities is in regards to their tax treatment. The concept behind fixed income annuities is actually quite simple. A fixed annuity is simply an insurance product which pays out a fixed income over a specified period of time. This payment is determined at the time of the contract and typically does not vary.

One of the more appealing features of an annuity for most people is the option to make it a life annuity. These types of annuities can provide a steady, reliable income for the duration of an annuitant’s lifetime.

Most annuity contract are allowed tax-deferred growth inside of the annuity account, and are taxable upon the payments made to the beneficiaries. On the surface, this tax treatment is straightforward. However, as with most tax problems, the details can get a little complicated.

The tax-deferred growth means that any values that increase in the account during the accumulation phase are not taxable until they are pulled out of the account. This sort of deferred taxation can have very positive effects on the size of the account.

Every annuity payment is separated into two categories, nontaxable and taxable. To determine the taxable portion of the annuity distribution, you must first calculate the exclusion ratio. The exclusion ratio is calculated by dividing the investment amount in the annuity by the total amount expected to be received through payments. Each prospective distribution is then multiplied by the ratio to determine the taxable portions.

The portion of the contract that is non-taxable is generally the premiums paid, minus the previous non-taxable distributions and minus the value of any period certain or guaranteed features of the particular annuity contract.

Fixed period contracts are typically easier to calculate than life annuity contracts. In life income annuities, the expected payout amount used to calculate the exclusions ratio is based on life expectancy tables from the U.S. Treasury Department.

The fixed annuity can be a good vehicle for your retirement planning needs and the future preservation of your hard-earned money. Lifetime income annuity contracts are able to provide a steady, secure, and predetermined income that you are sure to not outlive. Add in the tax-advantages that annuities provide, and the fixed annuity can be a very effective insurance planning tool.

Be sure to check out Brian Atkinson at The Fixed Annuity Guide to learn more financial planning topics. Fixed annuities can be used in creative and powerful ways.

2008 IRA Contribution and Deduction Limits – IRS

April 15th is around the corner.  In case you are still wondering what the 2008 contribution limits are for ROTH and Traditional IRA’s, here it is verbatim from irs.gov.  Keep in mind that if you have both a ROTH and Traditional IRA, the limits apply when combined.  You cannot exceed the limit. 

2008 Combined Traditional and Roth IRA Contribution Limits:

If you are under 50 years of age at the end of 2008: The maximum contribution that you can make to a traditional or Roth IRA is the smaller of $5,000 or the amount of your taxable compensation for 2008. This limit can be split between a traditional and a Roth IRA but the combined limit is $5,000. This maximum contribution to a Roth IRA and the maximum deductible contribution to a traditional IRA may be reduced depending upon your modified adjusted gross income (AGI).

If you are 50 years of age or older before 2009: The maximum contribution that can be made to a traditional or Roth IRA is the smaller of $6,000 or the amount of your taxable compensation for 2008. This limit can be split between a traditional and a Roth IRA but the combined limit is $6,000. This maximum contribution to a Roth IRA and the maximum deductible contribution to a traditional IRA may be reduced depending upon your modified AGI.

See Publication 590, Individual Retirement Arrangements (IRAs), for additional information.

Common Mistakes to Avoid On Your 2008 Tax Return

(NewsUSA) – Whether you use software, complete them yourself, or go to a professional, avoid these common mistakes on your 2008 tax return.

Common Mistakes to Avoid On Your 2008 Tax Return

Recovery Rebate Credit

The IRS reports that nearly 15 percent of returns include errors in reporting 2008 federal stimulus payments. Errors result in higher taxes or a smaller refund, rejection of return or delayed refund.

Only about 3 percent of taxpayers will receive the Recovery Rebate Credit. They either did not receive a check or their family situation changed. Credits are to the refund amount or amount owed.

All taxpayers need to know their stimulus payment amount. Check your Notice 1378 or visit the Recovery Rebate Credit Information Center at www.IRS.gov.

Earned Income Tax Credit (EITC)

A quarter of those who qualify don’t claim the EITC, meaning they could miss up to $4,824. To qualify, you must have:

- A filing status of single, married filing jointly, head of household or qualifying widow.

- A Social Security Number (so must your spouse and qualifying children).

- Investment income of $2,950 or less.

- Earned income and adjusted gross income less than:

1) $38,646 ($41,646 married filing jointly) with two or more qualifying children;

2) $33,995 ($36,995 married filing jointly) with one qualifying child;

3) $12,800 ($15,880 married filing jointly) with no qualifying children.

Not E-filing

E-filing software checks for math errors and missing information, so the e-file error rate is about 1 percent versus 20 percent for paper returns. E-filing with direct deposit can also mean a refund in as few as eight days.

To e-file, you need either your 2007 adjusted gross income or 2007 self select PIN. If you can’t locate either, call the IRS at 800-829-1040.

Claiming Nontaxable Income

In addition to the economic stimulus payment, the following is nontaxable income:

- 401(k) contributions

- Pre-tax health insurance

- Pre-tax child care

- Welfare benefits

- Child support payments

- Gifts, bequests and inheritances

- Workers’ compensation benefits

More information about the aforementioned topics can be found at www.IRS.gov, and using TaxACT helps avoid all of these errors. Visit www.TaxACT.com for details.

One Year’s IRA Contribution Can Really Make a Difference in Savings

(NewsUSA) – New data from Fidelity Investments found that more  than eight out of 10 Americans have cut back on discretionary purchases because of the recent economic crisis, and nearly half of respondents are now saving money. But many are unsure where to place the savings for the greatest benefit.

“After maximizing workplace savings plans and paying off credit card debt, investors should consider saving more for retirement using an Individual Retirement Account or IRA,” said John Ragnoni, senior vice president, Fidelity Investments. “Even though Americans are facing a challenging economic environment, it’s important to prepare for the future by making annual contributions.”

For example, an investor who makes a single contribution of $5,000 to a Roth IRA now could see that amount potentially grow to more than $53,000 in 35 years, assuming an annual rate of return of 7 percent.

Additionally, consolidating old workplace savings accounts at former employers into an IRA may offer the most compelling benefits for managing one’s retirement savings, including a broader range of investment choices.

This hypothetical example assumes the following: (1) one annual $5,000 Roth IRA contribution made on January 1 of the first year, and (2) an annual rate of return of 7 percent, and (3) no taxes on any earnings within the IRA. The ending values do not reflect taxes, fees or inflation. If they did, amounts would be lower. Earnings and pretax (deductible) contributions from a Traditional IRA are subject to taxes when withdrawn. Earnings distributed from Roth IRAs are income tax-free, provided certain requirements are met. IRA distributions before age 59 1/2 may also be subject to a 10 percent penalty. Systematic investing does not ensure a profit and does not protect against loss in a declining market.