Postpone taxes by swapping real estate instead of selling it. This may enable you to trade up to property with a higher value. A tax-deferred exchange is a great tax-cutting strategy, but the rules are complex. Be sure to seek professional guidance. Call the team at Simons Bitzer at 317-782-3070 for more information.
Crooks wanting to steal your identity are using bogus e-mails and websites designed to look like genuine IRS communications. You might expect the April 15 filing deadline to mark the end of these scams, but they, in fact, are expected to continue for months.
An example of these bogus e-mails: You receive a message confirming IRS receipt of your tax return, but the IRS needs more information to process your return. The e-mail looks official and completely legitimate. But it isn’t. The IRS does NOT contact taxpayers asking for personal and financial information. These e-mails should be deleted immediately. Fake IRS websites are also created by scammers to lure victims into filling out forms providing information that results in identity theft.
If you have a sizable refund of your 2012 taxes, it may be time for you to check your withholding. After all, when you overpay your taxes, you’re making an interest-free loan to the government.
Reducing your withholding is as simple as filing a new Form W-4 with your employer. The form comes with a worksheet to figure out how many allowances you should claim. Don’t forget to allow for other taxable income besides wages, such as dividends or investment gains.
If you’re concerned about underpaying taxes and exposing yourself to penalties, there are a few rules you should know. Generally, you won’t face a penalty if you pay for 2013, through withholding or quarterly estimated payments, at least 100% of your 2012 taxes (110% if your adjusted gross income is over $150,000), or if you pay at least 90% of what you’ll owe for 2013.
Under the new tax law, it is now easier to convert your employer-sponsored retirement plan such as a 401(k), 403(b), or 457 into a Roth IRA account. This is similar to converting your traditional IRA into a Roth IRA, but with one very significant difference.
When you convert a traditional IRA into a Roth IRA, you can change your mind and undo this conversion (also known as a recharacterization) by October 15 of the following year. This may make sense when the value of the account has dropped since you did the conversion, because you do not want to pay tax on a higher value than the account currently has.
When you convert an employer-sponsored retirement plan, you do not have the option of undoing the conversion by October 15. Once you convert your employer-sponsored retirement plan into a Roth IRA, it cannot be undone.
If you decide to convert your entire 401(k) into a Roth IRA, the entire balance will be taxable in the year of the conversion.
If you want to take advantage of this new provision, please contact the team of Simons Bitzer at 317-782-3070 first because there are some very important tax planning consequences to consider. If done without proper tax counsel, you may be paying more taxes than you should. In light of the new tax law, there are now more variables that need to be considered in your tax planning.
Interest rates charged by the IRS on underpaid taxes and paid by the IRS on tax overpayments will remain the same for the second quarter of 2013 (April 1 through June 30). Therefore, for the first six months of 2013, the rates will be the following for individuals and corporations:
* 3% charged on underpayments; 3% paid on overpayments.
* 3% charged on underpayments; 2% paid on overpayments.
* 5% charged on large corporate underpayments.
* ½% paid on the portion of a corporate overpayment exceeding $10,000.
With questions or for more information, please contact Simons Bitzer & Associates at (317) 782-3070.