Now is a great time to refinance your existing mortgage, if you can.  Rates have fallen significantly in the last few months, so if your credit is still good, you’re still employed, not planning on moving soon, and you’re not underwater (have positive home equity), you can save a few bucks. Continue Reading »

Employee stock purchase plans (ESPP) enable employees to buy company stock at a discount.  The details can vary for each company, so please consult your company’s ESPP documents for your particular situation.  I was recently asked how to calculate taxes for stock sold from the Varian Semiconductor (VSEA) ESPP, so I’ll use this company as an example.  Many companies use a similar plan. Continue Reading »

Laura Crowley wrote a great article on the need to add a little elbow grease to the atmosphere of hope ushered in with the new Administration.

On a similar note, NPR recently had a story on the difference between Faith and Hope.  I think it was on the “Speaking of Faith” show, but I can’t find a link to the episode.  The message is that Faith implies the inevitability of a particular outcome (e.g. the recovery of the economy) vs. Hope means that such an outcome is possible but not certain (suggesting that it might be a good idea to work towards it).  I hope the ecoomy recovers,  and while nothing is 100% certain, I have faith that, if we all pull together, we’ll get through this.

Congress passed a law at the end of 2008 letting seniors off the hook for mandatory withdrawals from IRAs in 2009.  Normally, seniors 70 1/2 and older are required to take part of their money out of the IRAs each year (so that Uncle Sam can get his cut).  Failure to do so levies a hefty penalty of 50% of the amount that was supposed to be distributed.  But at least for 2009, seniors won’t have to worry about it.

Article in USA Today

For 2008, the maximum that a child can make in investment income and not have it taxed at the parents’ rate is raised from $1700 to $1800.  Another change for 2008 is that it now also applies to 18-year-olds who do not have earned income to provide at least half the child’s support.  Likewise it applies to 24-year-olds (and under) who are full-time students and do not earn enough to provide half the child’s support.  As in 2007, it applies to all children under 18.

IRS Form 8615

Note to readers:  This is a repost from the IRS website’s tax tips.  I thought it was quite useful and concise.

IRS TAX TIP 2009-05

When you file your 2008 individual tax return, you will use one of three IRS tax forms. Be sure to use the simplest form you can, which will help you avoid costly errors or processing delays so you won’t have to wait to receive your refund. Each of these forms can be filed electronically, which speeds up the processing of your return.

Use the 1040EZ if:
• Your taxable income is below $100,000
• Your filing status is Single or Married Filing Jointly
• You (and spouse) are under age 65 and not blind
• You are not claiming any dependents
• Your interest income is $1,500 or less Continue Reading »

If you converted your IRA to a Roth early in 2008, you may want to recharacterize the Roth back into an IRA.  You pay tax when you convert the IRA into a Roth.   For example, if you converted $20,000 from an IRA into a Roth in January 2008, and you are in the 28% tax bracket, you would owe $5,600 in tax.  If your $20,000 Roth then dropped in value to $12,000 by December, you should be saying “rats!”.  If you had waited to convert it would have only cost $3,360 in tax.  Even though it’s after the end of 2008, you can convert the Roth back to the IRA, and you won’t owe the tax for 2008.

IRS Pub 590 on IRAs

As you probably know, the US television broadcasting system will switch from analog to digital transmission on February 17th.  If you have cable TV service, then you don’t need to do anything, as the cable company will take care of it.  If you’re still using an antenna 1) kudos to you (for not paying for cable service) but 2) you’re going to need a converter box to convert the incoming digital signal to one your analog TV can interpret.  You can buy a converter at Best Buy or other electronics store.

To ease the transition, the US Commerce Department’s National Telecommunications and Information Administration (NTIA) is offering coupons to help defray the cost.  Each household may request up to two coupons, and each is worth a $40 refund on the purchase of a converter box.  However,  the funds Congress allocated for the program are running out.   The NTIA is requesting additional funds from Congress.  In the meantime, the NTIA is limiting the number of coupons they are mailing out.

So if you think you’ll need a converter box, send in for your coupon(s) now.

US DoC NTIA

Chance are you don’t need to file estimated taxes, but if you do, the fourth installment of 2008 estimated taxes is due Thursday, January 15th.  Most folks have sufficient tax withheld from their paychecks to cover their tax bill, but if you have additional income, e.g. rental income or significant dividends or capital gains, then you may need to pony up to Uncle Sam every quarter.  I remember that as a graduate student I had to file estimated taxes, as the University didn’t withhold taxes (I never understood why they didn’t).

If you end up owing more than $1000 and you didn’t pay at least 90% of your 2008 tax or 100% of your 2007 tax (whichever is smaller), then you may be subject to penalties.  So, if you need to,  send Uncle a check now.  And don’t forget your state taxes, too.

IRS Form 1040-ES

Oprah Winfrey is offering a free download of Suze Orman’s new book 2009 Action Plan.  We could all use a plan for the new year.  Download it now, as the offer ends January 15th.