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

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?

posted 2 months ago by Jeff from Oregon

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.

posted 2 months ago by Rick Corwin from Florida

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.

posted 2 months ago by Tom Byrne from California

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

Dan Simon

posted about 1 month ago by Daniel Simon from North Carolina

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.

posted about 1 month ago by T Becker from Connecticut

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

posted about 1 month ago by Alfred Hess from North Carolina

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

posted about 1 month ago by Joseph Zaremba from Texas

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.

posted about 1 month ago by Scott Devine from New York

Scott,

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

-Charles,
AAII

posted about 1 month ago by Charles Rotblut from Illinois

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.....

posted about 1 month ago by Scott Devine from New York

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.

posted about 1 month ago by Samuel Owusu from Maryland

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

posted about 1 month ago by Charles Rotblut from Illinois

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

posted about 1 month ago by Samuel Owusu from Maryland

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.

posted about 1 month ago by Robert Schmidt from Connecticut

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

posted about 1 month ago by Charles Rotblut from Illinois

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

posted about 1 month ago by Roger Grossel from Florida

Thanks, Charles. I appreciate the information.

Bob

posted about 1 month ago by Robert Schmidt from Connecticut

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.

posted 15 days ago by Leon Taksel from Maryland

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

posted 14 days ago by Chas Rupert from Virginia