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Thursday, February 4, 2010

Converting to a Roth IRA Can be Beneficial in 2010

Beginning January 1, 2010, the $100,000 adjusted gross income (AGI) limitation on Roth IRA conversions has been eliminated, making it possible for virtually all taxpayers eligible to convert from a tax-deferred 401(k) or Traditional IRA to a tax-free Roth IRA.

What makes converting advantageous this year are the several unique options you have to structure the conversion. Because you have to pay taxes on the amount that is being converted, you have two options for paying the amount owed. Either you can pay the entire amount due on your 2010 individual tax return or you can split the tax amount owed in equal 50 percent portions on your 2011 and 2012 returns. Another nice feature is, if the value of your account decreases after the conversion you are able to move your money back to your original retirement plan without having to pay any taxes, so long as you do so by the due date of your 2010 return, including extensions.

Other benefits of converting and having a Roth IRA are that all distributions are tax free after five years of owning the IRA and after age 59 1/2. Additionally, there are no required minimum distributions once you reach age 70 1/2, and your beneficiaries can inherit the account and keep the tax-free status.

posted by Valley Oak Financial at 2:22 PM 0 Comments

Thursday, January 14, 2010

Consider an Installment Sale

Are you having a difficult time trying to sell a piece of property? We all know in this economy it's a "buyer's market." Getting that property sold may take a year or two and your finances may not be able to wait that long.

You may want to consider an installment sale, which is selling the property and getting paid in installments versus one lump sum. Under this installment method, the income reported includes only part of the gain you receive each year, or are considered to have received. Meaning you only pay taxes on the payments received instead of the entire sale amount. (Special rules apply to rental properties or anything that has been depreciated).

Under the new tax laws, installment sales may even be beneficial to the buyer as well, depending on the circumstances. For example, if the seller agrees to an installment land contract with a first-time home buyer, the buyer would be eligible to receive the First-Time Homebuyer's credit.

posted by Valley Oak Financial at 11:53 AM 0 Comments

Thursday, December 10, 2009

Mileage Rates Down Again for 2010

The IRS has announced lower mileage rates for 2010, citing lesser transportation costs for its determination. Beginning January 1, 2010, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be 50 cents per mile for business miles driven, down from 55 during 2009. Rates also decreased from 24 cents per mile to 16.5 for medical or moving purposes, while the charitable organization rate of 14 cents per mile continues to remain the same. The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Independent contractor Runzheimer International conducted the study.

posted by Valley Oak Financial at 1:57 PM 0 Comments

Tuesday, November 17, 2009

Valley Oak Financial is a Toys For Tots Drop-Off Site

Christmas is right around the corner. To get into the season of giving, Valley Oak Financial is participating in the U.S. Marine Corps Toys For Tots program. If you donate regularly or if this is your first year to donate, our office is a toy collection location. We will be accepting donations of new, unwrapped toys on behalf of Toys For Tots until December 18, 2009.

The mission of the U.S. Marine Corps Reserve Toys for Tots Program is to collect new, unwrapped toys during October, November, and December each year, and distribute those toys as Christmas gifts to needy children in the community in which the campaign is conducted.

posted by Valley Oak Financial at 1:38 PM 0 Comments

Monday, November 9, 2009

First-Time Homebuyer's Credit Extended and Expanded

If you thought you weren't going to close on your house in time to receive the First-Time Homebuyer's Credit -- there is good news from the White House. The credit has been extended to cover purchases made before May 1, 2010. You can still claim the credit if you sign a binding contract by that date, but closing must take place by July 1, 2010.

Some changes have been made to the requirements of eligibility as well. The adjusted gross income now phases out at $125,000 for single filers and $225,000 for joint filers. The old phase-out thresholds were $75,000 and $150,000, respectively.

The credit also includes repeat homebuyers who purchase a new principal residence and have lived in their current principal residences for at least five out of the last eight years. The maximum refundable credit for this new expansion to repeat buyers is $6,500.

One rule that is not changing is that a purchaser can treat the purchase as having occurred on December 31 of the previous year, and claim the credit against that year's taxes.

Responding to concerns about fraud and misuse of the credit, legislation also caps the purchase price of eligible homes at $800,000, excludes purchasers under 18 years of age, and tightens other requirements.

For questions regarding the First-Time Homebuyer's Credit, please feel free to contact Valley Oak Financial.

posted by Valley Oak Financial at 8:08 AM 0 Comments

Wednesday, November 4, 2009

Simplify Paying the IRS

Owing the IRS money may not be the ideal situation that you want to be in on April 15, but for many it is inevitable. Issuing and mailing another check for your 1040 or for 1040 quarterly estimates payments can be cumbersome once you figure all the time you put into running to the post office, calling your CPA, and locating the address to mail your check. Save yourself some time and stress by paying your tax bill by phone or online.

To pay by phone you will need a credit or debit card. Call 1-800-2PAYTAX or 1-888-PAY-1040.

To pay online you have options. To use a credit or debit card only, you can go to www.official payments.com or www.pay1040.com. To pay by electronic funds transfer you can pay via EFTPS at www.eftps.gov or by calling 1-800-555-4477.

Using any of the online options is advantageous because you can schedule reminders to pay or you can schedule your payments in advance. You can also receive payment confirmation for your records. If you owe $25,000 or less in combined taxes, penalties and interest, you can request an installment agreement online at www.irs.gov.

For assistance on paying your tax bill by phone or online or setting up an installment agreement, please feel free to contact Valley Oak Financial.

posted by Valley Oak Financial at 6:28 PM 0 Comments

Monday, October 5, 2009

Things to Know If You Receive an IRS Notice

Have you ever received a notice from the IRS? For some, instant panic sets in at the very thought of it. Chances are you may never receive one. However, if you do, there are a few things you should know about how to properly deal with the correspondence.

1. Many of these letters can be handled with little effort, such as writing a letter, making a call, or sending a fax.

2. Review your records. If the IRS is requesting a payment, please do not mail the payment without verifying that the proposed information is correct. The emphasis on not instantly paying a balance due cannot be expressed enough. For instance, assume you sold stock that you purchased but forgot to report. The IRS will send you a notice calculating a gain based on how much you sold it for and they will assume that you paid NOTHING for that stock. Thus making you pay more in additional taxes than you have to.

3. Be sure to respond to the IRS. Although many of these letters may not require you to respond, some of them do. Please be sure to reply by the deadline date given on the notice, or your account may incur interest and penalties. If you are not sure if you should respond or not, or if you need more time to gather information, ask your CPA for assistance.

At Valley Oak Financial, it is our firm's policy to handle any error resolution via an IRS notice that was our fault at no cost to you. Regardless of who is in error, we will also provide a no cost review of the notice to determine the issues and course of action. If you have any questions regarding a notice that you received, please do not hesitate to contact Valley Oak Financial.

posted by Valley Oak Financial at 9:55 PM 0 Comments