Is the Buffett Rule fair?

1. The “Buffett Rule” is not a reference to anything having to do with Jimmy Buffet, although that would have made for a great rule in my opinion. It is a reference to the “most successful investor in the world”, Warren Edward Buffett, owner of Berkshire Hathaway and Nebraska Furniture Mart.

2. The bill, if made into law, would impose a mandatory 30% effective tax rate for anyone making more than $1 Million in adjusted gross income. Many prognosticators have gone on record saying the bill will die quickly in the Senate. It likely did already.

3. The rule was drawn up into this piece of legislation after President Obama made reference to the differences in tax rates paid by Warren Buffett and his secretary. Warren relies primarily on investment returns as his income, and is therefore primarily subject to the capital gains tax rate of 15%. Warren’s secretary relies primarily on her salary and is therefore primarily subject to income tax rates, which are capped at 35%.

4. Investment returns and income from employment are taxed differently for a reason. First, because the federal government wants to encourage investment, which leads to growth in the economy, jobs, etc. Secondly, and more importantly, there is a belief that earnings should not be subjected to double-taxation (e.g. taxed when earned by a salary and then again when that money is invested a company pays corporate income tax on its profits, then the stockholder pays again on the capital gain or dividend income derived from those profits).

5. Even though some are saying the rule is about equality, the bill states in the title, “to reduce the deficit by imposing a minimum effective tax rate for high income tax payers.” If made into law, the Buffett Rule would bring in an estimated $4.7 Billion a year. The 2011 federal deficit was $1.56 Trillion. In case you don’t want to do the math, the proposed law would reduce the deficit (not the debt, the deficit) by roughly 0.3%.

My take: I think capital gains taxes are already double-taxed, if not triple taxed. Think about it. A company produces a profit by providing a service or product of value. That profit is then taxed at corporate tax rates.

The remaining “after-tax” profit is what’s reflected in the company’s stock valuation. When that profit is distributed to shareholders it is taxed as a capital gain tax rate of 15%.

Additionally, the money that the shareholder used to invest in the shares was not taken out of thin air. It was earned at a job or through another business by someone and already taxed at income tax rates, which are as high as 35%.

Because of this double and triple taxation, I think capital gains, and certainly what amounts to a mandatory 30% capital gains tax rate is unfair and bad for investment. Additionally, I think the rule itself only serves to pit the classes against each other.

It should be no surprise then, that I actually think progressive income tax rates are unfair. There is absolutely no basis for requiring someone to pay more than an equal share and calling that “fair”. You can call it necessary, or according to the law, but you can’t abuse the word fair (in the “just” sense) like that, in my opinion.

Further, the only reason we have progressive tax rates in this country to begin with is because we can get away with it. There aren’t enough progressively wealthy people to protest the incremental increases.

Of course, what’s fair to me may not be considered fair to everyone else. For instance, a recent poll showed that 60% think the Buffett Rule is a good idea. Personally, I doubt most of those 60% could spout the five facts above though.

Am I wrong? Is the Buffett Rule fair?

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5 Facts About the Buffett Rule is a post from: PT Money: Personal Finance by PT.
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Did you make enough to have to file taxes?

When in doubt, I say go ahead and file your return.

But I know you guys want numbers, so I’m going to give them to you.

However, the minimum income to file taxes isn’t one number that I can spit out to you so easy.

There are a series of questions you should answer to help you come up with the minimum income amount that applies to you. Let’s start with the IRS questionnaire found on their “do you need to file” page.

The questions are designed to help you determine whether you need to file a federal tax return and whether you need to adjust your Form W-4 to eliminate withholding. The IRS has stated that they want to help eliminate wasted time and money from returns that are filed that shouldn’t be. I say you take them up on that offer and work through the questions. Here are the first set of questions:

IRS Questionnaire to Determine if You Need to File

If you answer yes to any of those questions then you should file a 2011 federal tax return regardless of your earnings.

Right away you should see that if you have self-employment income of more than $400 then you need to file.

If you answer no to all of the questions, then you might be able to avoid filing.

The next question you need to ask is whether someone else can claim you as a dependent. If you are not a dependent AND you are under 65 years of age, then you won’t need to file taxes unless you income exceeds (numbers updated for tax year 2011):

• $9,500 (single filer),
• $12,200 (head of household),
• $19,000 (married filing jointly),
• $15,300 (qualifying widower with dependent child).

Note that if you are filing married filing separately, you will need to file a return.
Note that for those filers 65 and older, the income numbers are slightly higher for some filing types. See the IRS questionnaire for more info on this.

If you are a dependent then you follow a different set of rules. It’s sort of complicated, but basically if you are a dependent who is under 65 who has unearned income (i.e. interest income) over $950, or earned income (i.e. wages) over $5,800, or if your combined earned and unearned income exceeds $5,800, then you need to file.

If your income is in the lower range and you are just not sure what to do, you can always start to complete a federal tax return through a free filing service like the one TurboTax offers. Their software should help you determine if filing is even necessary.

What about you? Did you earn enough to file?

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Are You Sure You Earned Enough to File Taxes? is a post from: PT Money: Personal Finance by PT.
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Have you ever given something of significant value to a friend or relative and wondered what the tax implications are?

In most instances, there aren’t any tax implications for giving (gifting) a car, or other asset to a friend, relative, or even stranger.

Giving a Car as a Gift

I just received this question from a reader:

My brother-in-law wrecked his car and the insurance company totaled it. He has horrible credit so we decided to give him my car so he could get out from under some bills and what was a 20% interest rate and $500/month payment on his car. He flew out here from out of state and drove the car back. My question is, are there tax implications for either of us if we gift him my car. It was in my name. He is my brother-in-law. So I can’t find much other than gifting a car to your brother.

This is certainly a very generous move. But it’s not one that has a tax effect, in most cases. In this particular situation, and most like it, the person giving the car doesn’t get a deduction and the recipient doesn’t have to claim it as income.

For a gift to be considered tax-deductible, it should be made to a qualifying charitable organization. So, unless your friend or relative is actually the organizer for a charitable organization, like George Costanza and his Human Fund, you can’t claim the gift as a charitable deduction on your taxes.

On the other side of the transaction, the recipient doesn’t have to claim the gift received as income. So, they don’t have to pay taxes on it.

Gift Tax Exclusion

But the IRS just doesn’t let you give everything away at the end of the year without getting involved. Big givers will have to file a special Form 709 if they exceed the annual gift tax exclusion ($13,000 for 2012).

Have you ever gifted a car or similar asset to an individual or charitable organization? Share your experience below…

Tax Implications of Giving a Car (or Anything Else) to a Friend or Relative is a post from: PT Money: Personal Finance by PT.
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Are you saving your tax refund?

The April 17th tax deadline will be here before you know it.

I should be getting around to filing our tax return in the next few weeks.

This year, thanks to our little tax deductions (our two girls) and my estimated tax payments, we just might be getting a decent sized refund.

If you work for someone else, you should adjust your W-4 to get the proper refund.

I’m normally a fan of managing the with-holdings such that you don’t get too much refund.

But I admit it’s nice to get a little money back.

I’m not sure where you find yourself today, but check out these two posts if you’re having trouble paying or filing your taxes:

• What if You Can’t Pay Your Taxes this Year?
• What if You Can’t File Your Taxes?

In the past, we’ve used our tax refund money to help fund our Roth IRA contributions. I guess technically we used money from our bank account to fund the Roth IRA. But those funds will be quickly replaced by the tax refund.

Did you know that if you don’t already contribute to a 401K and meet the income requirements you can increase your tax refund by contributing to a traditional IRA?

What to Do With Your Tax Refund

You see (above) what I’m doing with my tax refund, along with my standard recommendation. But let’s look at some other things you can do with your tax refund.

Start an Emergency Savings Fund – Everyone needs an emergency fund to help them through a tough financial situation, like a job loss, car accident, or medical emergency. You need an emergency fund to create that cash cushion between you and your need for credit to solve the problem.

The standard advice is to shoot for about six months of living expenses. I think that’s fair, especially if you have two incomes in the home and your jobs are fairly stable. Know your risk though and make sure your emergency fund is big enough based on you.

If you’re looking for a place to open up an emergency fund, look no further than an online savings account.

Get Rid of Debt – Debt stinks. It causes stress and wastes money due to the high interest payments. Get rid of it. Make a solid plan to get out of debt (i.e. debt snowball) and get it paid off as quick as possible. A big tax refund could really wipe out a bunch of debt.

If you’ve just got mortgage debt, consider making a principal-only payment.

Save Money for Other Short-Term Goals – An emergency fund is a good starting point, but surely you have other short-term savings needs. Can you think of any reasons you’ll need a large chunk of cash in the near future? Here are a few ideas to get you started:

• new or used car
• major car repairs
• trip or vacation
• boat or motorcycle
• downpayment on a home
• furniture
• improvements to your home
• new clothes

Don’t go into debt to afford life’s upcoming necessities and pleasures. Use your tax refund.

Saving for Retirement – My favorite (best) thing to do with your tax refund is to do what I did, use it towards retirement savings. If you have a 401K through your employer, you could stash the funds there.

Many people use their tax refund to open an IRA. You guys know I love these. You can open them on your own with an online stock broker and you can control just about everything that happens with the money there, unlike your 401K.

Of course, there are the tax benefits that come along with saving for retirement with your tax refund. You could actually increase your return if you contribute to a traditional IRA, or SEP IRA (or even a Solo 401K) if you’re self-employed.

Save for College Expenses – Some people choose to use their tax refund to open up a 529 college savings plan for their child(ren). Money that goes into your 529 plan can grow tax-free as long as it’s used for qualifying expenses.

As long as you choose a “savings” plan vs a “prepaid” plan, your child(ren) can use the funds at any college or university that they want.

Go Back to School – Use your tax refund to go back to finish or start a degree. I love seeing people invest in themselves. Do it for fun, or see it as a way to increase your earning potential at your current (or future) employer.

Start a Business – Now you have the cash to start that business you’ve always wanted. You can tell someone is really passionate about their business idea when they self-fund the thing like this. Using your own money to start a business is definitely a better idea that taking out some business loan or borrowing from your relatives.

Use it for Charity – If the tax refund is a surprise to you, then why not use it to help a worthy cause. There’s definitely some organization that could use the funds more than you. If you do decide to give, use a qualifying charitable organization and get a deduction next year on your taxes.

If you haven’t filed your taxes yet, you can do so with any of these reputable tax software companies:

• TurboTax
• TaxACT
• H&R Block at Home Online

There are lots of things you could do with you refund: save, spend, give.

What do you plan to do with your refund? If you already spent the money, what did you spend it on?

Image by TaxBrackets.org

What Are You Doing with Your Tax Refund? is a post from: PT Money: Personal Finance by PT.
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W-2s? Check. 1099s? Check. Calligraphy Pen? ...doh!

We’ve still got plenty of time before the last day to file taxes, so you’ve got time to get ready.

But even if you want to purposefully wait till the last minute, it doesn’t hurt to start pulling together your information.

I still try to follow the boy scout motto: be prepared!

If you’re expecting a refund, well then you probably want to get that money as soon as you can, right? Sure you do. You want that money as quick as possible so you can put it to good use in your own financial situation. Stop procrastinating and get your taxes filed today.

I’ve put together a quick list of things you may need to file your tax return, whether you’re using a CPA or other tax professional, or whether you are doing it yourself through a service like TurboTax, H&R Block At Home, or QuickTax (for Canadians).

Tax Prep Checklist

This is by no means a comprehensive list. Just something to get you started. Be sure to check with your tax professional or use your software as a guide to ensure you’ve got everything covered. For a more comprehensive list, be sure to check out the Turbo Tax list below.

1. Your family and dependant’s Social Security Numbers
2. Your bank account and routing number (to have your refund direct deposited)
3. A list of the taxes you’ve paid during the year (estimated tax payment, sales taxes, property taxes, etc.)
4. W-2′s and other income tax forms (1099′s, Schedule K-1, etc.)
5. IRA Contribution Info
6. Education information (tuition paid, student loan interest paid, etc)
7. Home mortgage interest paid
8. Medical expenses
9. Job search and moving related expenses
10. Charitable donations

One of the benefits to using an online tax service is that you can save your progress and come back to the return at a later time. So, having your items in order before you begin isn’t as important as say going into a CPAs office expecting to your your return prepared.

If you don’t have everything ready for you CPA, you’re going to have to go home and get that info, wasting gas money and time on a return trip. Avoid that situation by having everything ready the first time using this checklist. Most CPAs will provide you with an organizer packet as well. So be sure to request that if you didn’t receive it in the mail.

Extra: For a more comprehensive list, check out this checklist put together by the folks at TurboTax: TurboTax – Tax Preparation Checklist

What about you? Do you do your own taxes? Do you use software, a service, or a CPA? If so, how do you ensure they have everything covered?

Tax Preparation Checklist is a post from: PT Money: Personal Finance by PT.
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I wanted to take a quick moment to review some of the basic tax law changes that will be relevant for those filing a 2011 return.

In the coming weeks, I might be presenting posts that break some of these important changes down even further.

But for now, I’ll just give the highlights of each change affecting the 2011 tax filing season.

The Bush tax cuts were essentially extended, leaving many things unchanged from last year to this year. Federal income tax brackets will remain unchanged, but the standard deduction will go up, while the child tax credit also remains unchanged.

This year’s biggest change came in the form of the payroll tax break to your withholding, essentially continuing the “making work pay” credit.

2011 Tax Law Changes

Here are some of the tax law changes we saw which will affect the 2011 filing year.

Payroll Tax Break – For 2011 one half (the employee half) of the Social Security portion of the payroll tax has been reduced to 4.2% That’s down 2% from the normal 6.2%. Don’t ask me how they are making up the difference. Anyway, you should have seen this change reflected in your paycheck all throughout 2011.

Of course, for any self-employed folks out there, you get the 2% break only on the employee half of your payroll tax. Accordingly, if you normally take the deduction for 50% of the self-employment tax on your 1040, then you will need to reconfigure based on the new percentages.

AGI for Saver’s Credit Increased – If you’ve previously been unable to participate in the Saver’s Credit, look again. The adjusted gross income (AGI) limits are now $56,500 (married filing jointly), $42,375 (head of households), and $28,250 (single).

Report 50% of Roth IRA Conversion – If you did a Roth IRA conversion in 2010 you had the option to report the conversion and pay the appropriate taxes in 2009, or spread your reporting out 50/50 over the 2011 and 2012 tax years. Now that returns for 2011 are due, you need to report 50% of the conversion as ordinary income on Form 1040 under Line 15a.

Standard Deduction Increased – For 2011, the standard deduction for married people filing jointly is $11,600, $5,800 for single, and $8,500 for head of household. Tax rates did not change as the government extended the Bush tax cuts.

Note that the last day to file taxes (federal personal income taxes) is April 17th, 2012.

I know there are other changes to consider when filing your 2011 tax return. If you know of any, please leave them in the comments below.

Previous year changes are on the next page.

2011 Tax Law Changes is a post from: PT Money: Personal Finance by PT.
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File your taxes for free this year!

It’s tax time!  You should have received your W2s by now so you should be ready to file your taxes.  April 17th, the last day to file taxes this year, will be here before you know it. So get going.  Luckily, if you meet certain criteria, you may just be able to file your federal taxes for free online, even e-file.

Here are three ways you might be able to file taxes online free. Two of which I’ve used in the past:

1. TaxACT Free Federal Edition (TaxACT.com)

With TaxACT you can a e-file a 1040, 1040A, and 1040EZ for free. No income or age restrictions apply. Your state return, however, will be $14.95. Hopefully you’re like me and live in a State with no income tax. Otherwise, you’ll need to pay that fee. But it’s not very expensive compared to other sites.

I began using TaxACT back in tax year 2001. That was the first year I did my taxes by myself (my Father is a CPA with a tax practice) and so I wanted to do them as cheap as possible.

Back then you couldn’t e-file for free like you can today, so I would use the online software (from a library computer) and complete the 1040, print it out, and mail it in. I did this for 6 years, up until I got married. I even did my wife’s while we were dating using this service.

2. Free File (IRS.gov)

Free File is a free federal income tax preparation and electronic filing program developed through a partnership between the IRS and the Free File Alliance LLC.  The Free File Alliance is a group of tax software companies you can choose from when filing through Free File.

Your adjusted gross income (AGI) must be $57,000 or less to use this service. According to the IRS, 70% of all tax payers are eligible based on AGI.

I believe this is actually how I discovered TaxACT back in the day. At the time they were involved with this program.

Now it looks like several other companies are involved: Tax Simple, H&R Block’s Free File, Free1040TaxReturn, 1040.com Free File Edition, TurboTax® Freedom Edition, FileYourTaxes.com, FreeTaxUSA® IRS Free File Edition, 1040NOW.NET, yesicanefile.org, OnlineTaxPros.com, TaxSlayer, Online Taxes at OLT.com, eSmartTax By Liberty Tax Service, ezTaxReturn.com.

The IRS has a nice tool to help you sort through this list to find a company that’s right for you based on your criteria. The IRS site says that some of these companies may even offer state return filing for free as well.

3. TurboTax® Federal Free Edition (TurboTax.com)

With TurboTax® Federal Free Edition you can file a 1040EZ and other “simple” returns. Your state will cost you $27.95. Yikes! I looked up the other “simple” returns and found that they cover the following:

• Form 1040 Schedule A – Itemized Deductions
• Form 1040A – Individual Income Tax Return
• Schedule B – Interest & Dividend Income
• Schedule EIC – Earned Income Credit
• Schedule SE – Self-Employment Tax

The good thing about this version is that you can e-file for free and there is no income threshold.  So if you live in a state with no income tax, have income higher than $57k, and don’t have any business income, then this is the service for you.

Additional Tips on Filing for Free

• The IRS has an extensive list of other available e-filers on the web.
• If you don’t qualify for the 3 above or you’re not comfortable using online services, try this method: go in for half with a friend on TurboTax in the box. Each piece of software is good for two computers. This is actually what I did one year. The box of software cost us $20 ($10 a piece).

Do you plan on filing your taxes for free this year?

Image by SeniorLiving.org

3 Ways To File Your Taxes For FREE is a post from: PT Money: Personal Finance by PT.
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H&R Block has long been known as the largest tax service company. They actually prepare 1 out of every 7 tax returns that are filed in the U.S. They do it with physical branches and with their online and offline tax software products. H&R Block meets you where you are at and gives you the choice: do you want to meet face-to-face with a tax professional, or do you want to do it yourself, either at home or online. If you need a local branch, odds are there is one within 5 miles of you right now.

If you just need tax software, you can quickly get it on their website at www.HRBlock.com. Increasingly, customers are taking them up on both services at once, as H&R Block features a “best of both” service where you get to complete your return using their online software and you follow it up with a tax pro just before filing. Their suite of products and services shows that H&R Block is committed to being the tax preparation provider that you choose each year.

H&R Block At Home Online 2012 Review

I used their software to prepare my 2008 tax return. The name has since changed (used to be called TaxCut), but the product is still the same, and the software is continually updated with tax law changes. The one knock I have against H&R Block is that they aren’t in the business of just tax software. So while they have a good product, it isn’t their only (nor primary) focus. They are first and foremost your local tax services branch. But I guess that has it’s advantages for some as well.

Their At Home product works just like you would think. You are required to enter in your personal information, then you are asked a series of questions to help you complete the return. You can stop and start and save your work. You can also jump around to various sections. There is a final error check, and then you are ready to file. Free e-file comes with each of their packages, but there is a fee to file your State return, like other tax software products.

Four Different Editions of H&R Block At Home Online

H&R Block At Home Online Free Edition (Free) – If this is your first time filing a tax return, or if you don’t mind entering all of your personal and important prior year information in again, then choose this edition. This version is aimed at those filers with a simple tax situation (i.e. no house, investments, or small businesses). E-file your State return for an additional $27.95

H&R Block At Home Online Software Basic ($19.95) – If you’ve filed with H&R Block last year then you will want this service. It comes with the ability to import your prior year information, so you are half way done with your return right from the moment you do the import. Like the Free edition, you really shouldn’t use this edition if you have a difficult tax situation involving a business, home, or investments. E-file your State return for an additional $34.95

H&R Block At Home Online Deluxe ($44.95) – This edition is aimed at the taxpayer who is also a home owner, or who owns investments (not including real estate). This edition will help walk you through the various itemized tax deductions like home mortgage interest, property taxes, and charitable contributions. If you have self-employment income, this still isn’t the edition for you though. E-file your State return for an additional $34.95

H&R Block At Home Online Premium ($64.95) – Finally, if you have self-employment income or own a business, or if you have real estate investments, you will need to step up to the premium edition of At Home. This is by far their best value. It not only contains the software to handle your difficult return, it also comes with one free session with a live tax professional (a $19.95 value). E-file your State return for an additional $34.95

At Home Guarantees and Audit Support

H&R Block goes to far as to provide guarantees for their At Home product. They guarantee that they will provide accurate calculations on your return or they will pay penalties and interest charges. They also provide a guarantee that you will get the biggest refund. If you get a bigger refund with another provider, they will refund your purchase. Finally, H&R Block offers free audit support to all of their online customers. So if you are ever audited, they will be there for you through the process right up until the actual audit meeting, and you can even hire them to help you there.

Customer Service

H&R Block proudly displays their customer support hotline (1-800-HRBlock) on their main support page. They also have the unique advantage of having local offices nearby to guide you through difficult questions. This can run you $19.95 though, unless you purchased the Premium edition. In that case, you get one free meeting. Their online portal has plenty of documentation to help you through the technicalities of using the online product.

H&R Block At Home Coupons

There are various ways to save when buying H&R Block At Home. You can always save 15% on all H&R Block At Home Software. For a limited time (till Feb. 28th, 2012) you can:

• Save 15% on H&R Block At Home Online Basic, Deluxe or Premium Packages!

Have you used H&R Block’s online product? What did you think?

H&R Block At Home Online 2012 Review is a post from: PT Money: Personal Finance by PT.
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My TurboTax 2012 review hardly needs an introduction. These guys are the best-selling tax preparation software program year-after-year. Their software walks you step-by-step through the process of preparing your taxes. They take care of yearly tax updates and understanding the confusing tax code. All you need to do is decide which of their versions to use, then complete a series of questions, and file. Depending on the complexity of your tax situation, this can take anywhere from 15 minutes to 2 hours.

TurboTax 2012 Review

TurboTax provides their software in both offline (CD or download) and the increasingly popular online versions. Their software is perfect for the person who is fairly confident in preparing their tax forms, but who might need just that extra piece of assurance. Their software also allows you to complete your taxes at your own pace. Save your progress and return to complete it later. TurboTax is a product of Intuit, the same company that owns Mint.com, Quicken, QuickBooks.

Right up front I can tell you that I’ve used TurboTax in the past and I enjoy their product. But I know they are not for everyone. If you require the face-to-face time with a professional (as many people do), then you aren’t going to get it with TurboTax.

Other tax preparation software providers have physical branches where you can actually meet with a tax professional. TurboTax doesn’t offer that. Their focus is on the software alone. In addition, TurboTax generally isn’t going to provide the level of service that a CPA or Enrolled Agent can.

But if all you need is a piece of rock-solid, do-it-yourself tax preparation software, then you’ll be hard pressed to find a better product than what TurboTax can offer you. TurboTax offers four different versions of their product aimed at personal filers. Here’s a quick rundown of what each edition contains:

Different Versions of TurboTax

TurboTax Free Edition (Free) If you plan on filing a 1040EZ, 1040A, or simple 1040, then you might qualify for their free edition, regarless of your income. This version is very straight-forward: asks you a series of questions, checks for any errors, and then helps you e-file for free. If you have to itemize your return because you have a mortgage, child care expenses, charitable donations, or medical expenses, then you shouldn’t use this edition. This version comes with the same support and guarantees as the other paid versions. While the federal preparation and e-file is free, to e-file your State you will have to pay $27.95.

TurboTax Deluxe ($29.95) This edition is aimed at the average tax filer without investments, rental property, or self-employment income. This version will help you complete your itemized decuctions and find available credits. It also comes with ItsDeductible®, Audit Risk Meter™, and Audit Support Center (in case of an audit). Finally, it comes with a new feature: you can import prior year tax data or documents, even from other software packages. You can also import data from Mint.com with this edition. State filing with this edition will cost $36.95.

TurboTax Premier ($49.95) The Premier edition comes with everything you get in the Deluxe edition plus support to help you complete your tax forms related to investments and/or rental properties. Helps you quickly find deductions associated with your rential units. Also, you are able to quickly import your investment data from various institutions. State filing with this edition will cost $36.95.

TurboTax Home & Business ($74.95) Finally, if you have self-employment income, then you would be wise to consider the Home and Business edition of TurboTax. This edition will ask you different questions depending on the type of business you have setup: sole proprietor, 1099 contractors, single-owner LLC. It will help you zero in on business-related decutions like travel and your home office. This edition has seen some improvements in the following areas: deductions by industry notifier, W-2 and 1099 preparation for employees and contractors, help with depreciation method choices, and expense input on one screen, verses a page at a time. State filing with this edition will cost $36.95.

Confused about which version to choose? Review this comparison chart to find out which TurboTax is right for you.

Various Guarantees

TurboTax didn’t become the most popular tax software by accident. They put together a good product and they stand behind it. They want their customers to be satisfied. They make a committment to their customers to not only be easy and 100% accurate, but to also provide the maximum (biggest) refund. All of their versions come with a money-back guarantee. All of their online versions are free to use up until the point that you actually file. So there’s not harm in giving them a spin. If only to see what you’ll be ending up with this year.

Customer Support

Customer support will never match the services offered by a paid professional. But like I said above, TurboTax isn’t in the professional tax support business. That, however, doesn’t stop them from providing excellent customer service. They have four primary channels for you to use to contact them about their software or even tax and filing questions.

I tested out their online chat support. Even though it said it would take up to 30 minutes, I was instantly connected with a support person via chat who quickly answered my questions.  Share your experience with TurboTax in the comments below…

TurboTax 2012 Review is a post from: PT Money: Personal Finance by PT.
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The charts below will show you the latest income limits that apply to the Traditional and Roth IRAs.

Contributing to an IRA is a smart move. There are two major varieties for the typical tax payer to take advantage of: Traditional or Roth. The Traditional IRA gives you a tax deduction on contributions, while the Roth IRA lets you take distributions from the account in retirement without paying taxes.

• To figure out which type of IRA is right for you (and which broker to open it with) visit Mint.com and use their free IRA Wizard.  It doesn’t take long and offers a wide variety of options.

They are both excellent tools to help you build a solid portfolio enabling you to support yourself when you can no longer work. I highly recommend you use one or both to help you save for retirement today.

But there are limits (based on your income) that might affect your ability to use one of these accounts to your fullest advantage. Let’s look at each one closely.

Traditional IRA Income Limits for 2012

The IRS has chosen to limit your ability to fully deduct your contributions to a Traditional IRA based on your income. First, they split filers into two groups: those who are participating in a company retirement plan (i.e. 401K) and those who are not. Once tax payers are split into those two major categories, the IRS further refines the groups by filing status. In all cases Modified Adjusted Gross Income (MAGI) is used to define income.

If you do participate in your employers plan and…

If you file your taxes as Married Filing Jointly or as a Qualifying Widower in 2012, your income needs to be below $92,000 for you to be able to fully deduct your contributions to a Traditional IRA. If your MAGI is between $92,000 – $112,000 then you are in the “phase-out” range and the amount you can deduct starts “phasing out”. At $112,000 you are unable to deduct the contributions you make to a Traditional IRA.

If you file as Single, Head of Household, or Married Filing Separately (not living with your spouse) in 2012, your MAGI needs to be below $58,000 to completely deduct your contributions. Your phase out range is between $58,000 and $68,000.

If you file as Married Filing Separately (living with your spouse) in 2012, your MAGI needs to be $0. Your phase out range is between $0 and $10,000.

If you do not participate in your employers plan and…

If you file your taxes as Married Filing Jointly (and your spouse is covered by an employer plan) in 2012, your income needs to be below $173,000 for you to be able to fully deduct your contributions to a Traditional IRA. If your MAGI is between $173,000 and $183,000 then you are in the “phase-out” range and the amount you can deduct starts “phasing out”. At $183,000 you are unable to deduct the contributions you make to a Traditional IRA.

If you file as Married Filing Separately (and your spouse is covered by an employer plan) in 2012, your MAGI needs to be $0 to completely deduct your contributions. Your phase out range is between $0 and $10,000.

If you file as anything else and your spouse (if you have one) is not covered under a plan, then have no income limits to your ability to deduct the contributions to your Traditional IRA.

Historical Traditional IRA Income Limits

For those who participate in their employers retirement plan:

For those who DO NOT participate in their employers retirement plan:

Now let’s take a look at the Roth IRA and associated income limits. Thankfully, they are not as complex.

Roth IRA Income Limits for 2012

The IRS tax regulations limit your ability to contribute to a Roth IRA also by using your MAGI. They have three different categories based on your filing status.

If you file your taxes as Married Filing Jointly or a Qualifying Widower in 2012 then your income (specifically, your MAGI) needs to be below $173,000 for you to be able to fully contribute to a Roth IRA. If your MAGI is between $173,000 and $183,000 then you are in the “phase-out” range and the amount you can contribute starts “phasing out”. At $183,000 you are unable to participate in the Roth IRA.

For those who file as Single, Head of Household, or Married Filing Separately (not living with your spouse) in 2012, your MAGI needs to be below $110,000 to fully contribute. Your phase out range is between $110,000 and $125,000.

Finally, for those of you who are filing Married Filing Separately (living with your spouse) in 2012, your MAGI needs to be $0. Your phase out range is between $0 and $10,000.

Historical Roth IRA Income Limits

Every year, the income limits are evaluated against inflation and incomes to determine if a change is needed. In the past five years there has only been one instance where the limit did not change for the two major categories.

More About MAGI and Contribution Limits

Want to know what your MAGI is? First, find your AGI. Check out your tax return. Your AGI is at the very bottom of page 1. It’s essentially your income minus your “above-the-line” deductions.

Now take that number and add back in your IRA deduction, student loan interest, tuition and fees deductions, any domestic production activities, any foreign earned income exclusions, any foreign housing deduction, any excluded qualified savings bond interest, and finally, any excluded employer-provided adoption benefits. Thanks to Jim from Financial Ducks in a Row for explaining how to determine your MAGI.

Tax saving tip: Note that 401K contributions (which is a deduction you take to get to AGI) doesn’t get added back in to determine your MAGI. Use this knowledge to your advantage. If you are close to reaching your phase-out limits then add more contributions to your 401K to drop your MAGI so that you can continue investing.

Wondering what it means to “fully contribute” to your IRA? In short, your 2012 contribution limit is $5,000 annually. Those 50 and older can tack on an additional $1,000 for a total contribution of $6,000. For more on this, see the Traditional and Roth IRA contribution limits.

Traditional and Roth IRA Income Limits for 2012 is a post from: PT Money: Personal Finance by PT.
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