The Individual Investor’s Guide to Personal Tax Planning 2012—Updated

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Our annual tax and financial planning guide is designed to help you assess your current tax situation and plan for any changes that may improve your tax liability both this year and next.


Discussion

Jeff from Oregon posted about 1 year ago:

In 2013, people in the 10% and 15% tax brackets will continue to have a 0% rate on capital gains and dividends. Is this tax rate for capital gains and dividends now permanent or was it only continued for the 2013 tax year?


Rick Corwin from Florida posted about 1 year ago:

Retirees covered by Medicare should be aware that the premiums are adusted for income. The Social Security Administration uses "Modified Adjusted Gross Income" (=AGI + tax-exempt interest income) for 2011 to adjust the 2013 premiums for Medicare Part B and prescription drug coverage. MAGI over $214,000 can generate monthly adjustments of $230 and $67, respectively. While not part of the Form 1040 reporting, this is nevertheless a tax on income.


Tom Byrne from California posted about 1 year ago:

Just downloaded it. Will have to digest this over a glass of wine ;-) The discussion section is apparently going to be very helpful to me. Thanks to everyone.


Daniel Simon from North Carolina posted about 1 year ago:

This review was very informative to a retired investor such as myself. The staff did a great job.

Dan Simon


T Becker from Connecticut posted about 1 year ago:

In the section “Avoiding Tax Underpayment Penalties” you state that “Income tax payments made through withholding from your paycheck (or from your pension or other payments) are given special treatment. The IRS treats income tax that is withheld as having been paid equally throughout the year (unless you prefer to use actual payment dates)”. This also applies to RMD if taxes are withheld. So if I take my RMD in December and have taxes withheld the IRS will treat this tax as having been paid equally throughout the year. This is a good technique to make up some ground on underpayment of taxes and avoiding penalties.


Alfred Hess from North Carolina posted about 1 year ago:

I appreciate the information and service that AAII provides. I, and I believe that many others, would appreciate if AAII would present the informational graphs of Market Returns of stocks and funds using a logarithmic scale for the vertical gain (or loss) scale. This allows one to see and compare at a glance how the gains (or losses) of several funds on the same graph compare, since equal slopes means equal rate of gain anywhere on the same graph. For example of this see the stock and fund graphs produce by YAHOO finance using the log gain scale. Thanks, Alyce, NC


Joseph Zaremba from Texas posted about 1 year ago:

I found all the info very useful.I've always used a blank 1040 page for a work sheet and the worksheet provided was lacking on the income portion.I prefer having all the dollar amounts on the worksheet so as not to to many pieces of scratch paper for the figures. It worked okay for me but it was a little confusing at times.
Thanks Joe, Tx


Scott Devine from New York posted about 1 year ago:

Is this statement true that was written in the article? I thought that if you had a retirement plan at work or a pension, you could not fully deduct an IRA contribution $5000.

Thanks

Individual Retirement Accounts and 401(k) Plans

The maximum allowed IRA contribution is unchanged in 2012 at $5,000 ($6,000 for any individual who is age 50 or older). The contributions can be fully deducted for modified adjusted gross incomes (modified AGI) below $92,000 for joint returns and below $58,000 for single filers.


Charles Rotblut from Illinois posted about 1 year ago:

Scott,

Yes, it is true. Here is the IRS rule on it:
http://www.irs.gov/Retirement-Plans/IRA-Deduction-Limits

-Charles,
AAII


Scott Devine from New York posted about 1 year ago:

Thanks Charles...but this is what your link states:



If you’re covered by an employer retirement plan for a tax year if your employer (or your spouse’s employer) has a:

Defined contribution plan (profit-sharing, 401(k), stock bonus and money purchase pension plan) and any contributions or forfeitures were allocated to your account for the plan year ending with or within the tax year;

Defined benefit plan (pension plan that pays a retirement benefit spelled out in the plan) and you are eligible to participate for the plan year ending with or within the tax year.

I have a 401K and a pension....so I do not believe I can deduct a contribution of say $5K to an IRA.....


Samuel Owusu from Maryland posted about 1 year ago:

Just a quick question.

My spouse is over 71 and half, she is currently still working. Does she delay taking out her Required Minimum Distribution (RDM) amounts from her deferred pension plans because she has not retired?

Thanks.


Charles Rotblut from Illinois posted about 1 year ago:

Hi Samuel,

Here is what the IRS says about RMDs:
http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics---Required-Minimum-Distributions-(RMDs)

You may also want to read:
http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics---Distributions-(when,-how-much)

Given you wife's age, it might be helpful to consult a tax professional to be sure you get a clear and correct answer.

-Charles
AAII


Samuel Owusu from Maryland posted about 1 year ago:

Thanks, guys. I appreciate your comments and I will follow them.


Robert Schmidt from Connecticut posted about 1 year ago:

Question for you that I have not seen answered before. If you are required to take a RMD, such as for $20K, are you able to still contribute $6K to an IRA and take that deduction on your taxes?
Thanks.


Charles Rotblut from Illinois posted about 1 year ago:

Robert,

Here is what the IRS says about who can open and make contributions an IRA:
You can open and make contributions to a traditional IRA if:

You (or, if you file a joint return, your spouse) received taxable compensation during the year, and

You were not age 70½ by the end of the year.

You can have a traditional IRA whether or not you are covered by any other retirement plan. However, you may not be able to deduct all of your contributions if you or your spouse is covered by an employer retirement plan. See How Much Can You Deduct , later.

Both spouses have compensation. If both you and your spouse have compensation and are under age 70½, each of you can open an IRA. You cannot both participate in the same IRA. If you file a joint return, only one of you needs to have compensation.

More information can be found at:
http://www.irs.gov/publications/p590/

-Charles


Roger Grossel from Florida posted about 1 year ago:

Re: Tax Forecasting Worksheet.
I thought I saw a previous comment on this -don't see it now.
How about a downloadable pdf or Excel sheet to allow us to work at our PCs on our forecasting & then to save it as we go.
Roger


Robert Schmidt from Connecticut posted about 1 year ago:

Thanks, Charles. I appreciate the information.

Bob


Leon Taksel from Maryland posted about 1 year ago:

re: the wash sale rule. You state that for any loss disallowed, the amount of the loss reduces the basis of the acquired stock. NOTE: it INCREASES the basis of the acquired stock, so that any future gain is reduced by that amount or any future loss is increased by that amount.


Chas Rupert from Virginia posted about 1 year ago:

I thought the information was helpful and
answered some questions I had.


G Abramo from New Jersey posted about 1 year ago:

This Q&A from CFR Title 26 (Internal Revenue) 1.408A-4 (Converting amounts to Roth IRAs) was brought to my attention by Vanguard and probably merits some attention in future editions of the Tax Guide. It indicates that taking a Roth Conversion *before* an RMD, in the same tax year, could be interpreted as making an excess Roth Contribution in that tax year.

Q–6. Can an individual who has attained at least age 70 1/2 by the end of a calendar year convert an amount distributed from a traditional IRA during that year to a Roth IRA before receiving his or her required minimum distribution with respect to the traditional IRA for the year of the conversion?

A-6. (a) No. In order to be eligible for
a conversion, an amount first must be eligible to be rolled over. Section 408(d)(3) prohibits the rollover of a required minimum distribution. If a minimum distribution is required for a year with respect to an IRA, the first dollars distributed during that year are treated as consisting of the required minimum distribution until an amount equal to the required minimum distribution for that year has been distributed. [....]

http://www.gpo.gov/fdsys/pkg/CFR-2012-title26-vol5/pdf/CFR-2012-title26-vol5-sec1-408A-4.pdf


L Woolford from Wyoming posted 5 months ago:

My Question about a Roth IRA:

My Roth IRA has been established since 1999. I have added the maximum to it when I have qualified earned income.

I have used this Roth IRA to invest in Mutual funds and some of the Shadow Stock Portfolio equities when I can.

Question - Can I deduct the commission expenses for such investments as part of "investment Expense" on my Schedule A (itemized Tax deductions) when submitting yearly Federal and State tax forms?


Charles Rotblut from Illinois posted 5 months ago:

L,

The answer is no because you are not recognizing taxable gains or losses in a Roth IRA.

In a taxable account, the commissions are added to the buy price and deducted from the sell price for calculating capital gains.

-Charles


L Woolford from Wyoming posted 5 months ago:

Hello Charles,

Thanks for the clear answer on my question.

Lynn W.


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