Tuesday, July 30, 2013

Newly Wed & Starry Eyed?...Here Are Some Tax Tips to Remember!

We were attending a dear friend's daughter's engagement when this thought occurred
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to me that most newly weds don't think of the change in their Tax Filing Status till Tax Time. Yes, blame it on my tax "nerd"i-ness!! 
I don't mean to burst the newly wed pink bubble, but these are important things to remember! 

Now that DOMA, Section 3 has been over-turned by the Supreme Court as well, there's even more details to keep in mind.  

Here are several tips for newlyweds from the Internal Revenue Service: 

  • It’s important that the names and Social Security numbers that you put on your tax return match your Social Security Administration records. If you have changed your name, report the change to the SSA using Form SS-5, Application for a Social Security Card. This can also be accomplished by calling 800-772-1213 or by visiting your local SSA office.

  • If your address has changed, file Form 8822, Change of Address to notify the IRS.
    Pic Courtesy: www.stonehousecollections.com
    You sho
    uld also notify the U.S. Postal Service if your address has changed. This can be done online or at your local post office.

  • If you work, report your name or address change to your employer. This will help to ensure that you receive your Form W-2, Wage and Tax Statement, after the end of the year.

  • If you and your spouse both work, you should check the amount of federal income tax withheld from your pay. Your combined incomes may move you into a higher tax bracket. Use the IRS Withholding Calculator tool to help you complete a new Form W-4, Employee’s Withholding Allowance Certificate. Or contact your Tax Adviser for more information.

  • If you did not qualify to itemize deductions before you were married, that may have changed. You and your spouse may save money by itemizing rather than taking the standard deduction on your tax return. You’ll need to use Form 1040 with Schedule A, Itemized Deductions. 

  •  If you are married as of December 31, that's your marital status for the entire year for tax purposes. Both of you can usually choose to file jointly or separately in any given year. 
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You may want to figure the tax both ways to determine which filing status results in the lowest tax. In most cases, it’s beneficial to file jointly. Talk to your Tax Adviser to advise you about the best situation. 

  • With the DOMA over-turned, there are many changes at the state level regarding Marital Filing Status. Because of Section 2 of DOMA, the ruling does not require any state to legalize or recognize a lawful marriage from another state.  

Please read my disclaimer here. For more questions regarding this and other matters, I can be contacted at manasa@mntaxsolutionsllc.com. 

Friday, July 19, 2013

Bankruptcy Fundamentals & Detroit

All over the news today, "Detroit Files For Bankruptcy under Chapter 9!". According to the Washington Post, Detroit’s filing Thursday was the largest municipal bankruptcy in the nation’s history, marking a now all time low in a long & continuous 
decline that has left "Motown", the U.S. auto-making capital bleeding it's few remaining residents and revenue while rendering city services a mess. The city, in it's hey day was the nation’s fourth-largest (in the 1950's), with nearly 2 million residents, has seen its population dwindle to 700,00, as people fled rising crime, corrupt politicians and deteriorating services, taking their tax dollars with them.

What is Chapter 9 Bankruptcy?  It is a lesser known chapter of bankruptcy that is
specifically designed for "municipalities". Municipalities include cities, towns, counties, taxing districts, municipal utilities, and school districts. Chap.9 allows municipalities to reorganize their debt by:
  • extending the timeline on repaying debts,                        
  • debt refinancing,                                                        
  • or the reduction of principal or interest on existing debts.                         
The assets of a municipality are not liquidated under Chapter 9. 

A fundamental goal of the bankruptcy laws enacted by Congress is to give an honest 
debtor a financial “fresh start”. 

 the filing of either a voluntary petition in the United States Bankruptcy Court, or in certain cases an involuntary petition filed by creditors.   This filing creates the bankruptcy estate. The bankruptcy estate generally consists of all of the assets the individual or entity owns on the date the bankruptcy petition  was filed.
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How can this be accomplished?                                                     This is done through the "bankruptcy discharge"which is a court ordered prohibition against the collection of certain debts as a personal liability of the debtor. Bankruptcy proceedings begin with:  
  • the filing of either a voluntary petition in the United States Bankruptcy Court,
  • or in certain cases an involuntary petition filed by creditors.  
  • This filing creates the bankruptcy estate. The bankruptcy estate generally consists of all of the assets the individual or entity owns on the date the bankruptcy petition was filed. 
If we remember not long ago similar doubts were cast when GM & Chrysler declared bankruptcy but we are still buying their cars. Hopefully restructuring it's debt will help Detroit reinvent itself & come back to it's glory days with help from Detroit companies like Quicken Loans, Blue Cross/Blue Sheild and General Motors.  
As always, read my disclaimer here. Please consult a qualified tax professional for your unique tax needs. More of my contact information is on my website, www.mntaxsolutionsllc.com. 

Sources: Washington Post, Detroit Free Press, www.irs.gov, Forbes.

Thursday, July 11, 2013

Charity Begins at Home Part 2

What factors determine if your donation is tax deductible or not:  For a charitable donation to be tax deductible, one has to keep in mind first and foremost that one has to itemize deductions on the tax return via Schedule A and,
  • That the donation is to a qualified organization. A qualified organization is an
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organization to whom one can  make tax deductible donations. Usually, this is an organization registered under Section 501(c)(3) or 501(c)(19). 
  • These organizations include non-profit groups that are religious, charitable, educational, scientific, or literary in purpose, or that work to prevent cruelty to animals or children. (For an exhaustive list refer Pub 526)
  • One can check for an organization's status with the Internal Revenue Service on this website. If there is ever a doubt in your mind as to whether an organization's tax exempt status is true, whether you want a tax deduction or not, this website would be a good starting point. 
  • You can also check with the Better Business Bureau for their accredited charities.
  • If you received a gift or any other benefit in exchange for your donation, it is deductible only to the extent it's value exceeds that of the gift/ benefit received. 
  • If you make contributions to needy individuals, your donation is NOT tax deductible. 
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  • The VALUE of your volunteer time is NOT deductible, however out-of-pocket expenses directly related to such volunteer work & miles driven to & from volunteering is tax deductible.

  • Donated goods may be deducted at their fair market value at the time of
    contribution. There is a general guide on valuing used clothing & other household items at this website. I would like to point out here that it is VERY important to keep either pictures or a list of items donated. This is increasingly becoming an audited area by the IRS and some claims are being denied if deemed exorbitant. The rules for donating cars and other vehicles are different. When donating goods Form 8283 has to be used to provide details & attached to Schedule A.  
  • In addition to the above if your cash donations exceed $250, you require a written acknowledgement from the charity. Bank records and written communication from the charity are also acceptable forms of records for donations less than $250. 
Please be sure to contact a tax professional if you need help with the above. 
As always, read my disclaimer here. Please consult a qualified tax professional for your unique tax needs. More of my contact information is on my website, www.mntaxsolutionsllc.com. 

Monday, July 8, 2013

Charity Begins at Home...& Other Thoughts...

Pic Courtesy: Google Images
I had a strange experience on my door step with a man selling magazine subscriptions for a Charitable Organization the other day. To confirm his legitimacy  he even showed me a check a neighbor had written for $50 and advised my donation to his organization would be tax deductible! 

Most of us, through out the year are approached by various charities either personally or on the telephone or through letters. The callers may want you to pledge an amount that instant. 

Financial stress has hit hard all round, both charities & donors are strapped for funds. My policy when approached thus in most cases is to ask for more information about the organization or a website where I can verify the information and choose if I deem it fit to make a donation. The above experience had me thinking about charities & donating, hence this post. 

Pic Courtesy: Google Images
Here are some tips on how to be a "Smart Giver": 

  1. Get the Charity's Exact Name.  With so many charities in existence, don't be in doubt, get the exact name. 
  2. Resist Pressure  to give on the spot, whether from a telemarketer or door-to-door salesman.
  3. Be Wary of Heart Wrenching Appeals  What is the most important issue when donating, it is whether you espouse the organization's ideas. 
  4. Always Ask For Specifics  Find out how and where the charity is working and be aware of it's goals.
  5. Check Websites  If a charity has a website, it's mission,, program & finances should be available to the general public. If not , check for a report at www.give.org.
  6. Check with State Officials Many states require charities to register with the office of the attorney general before they solicit. Check for the relevant office for your state. 
  7. Don't Assume Every Organization is Tax Exempt as a Charity Check here for an organization's tax exempt status with the Internal Revenue Service.  
The main reason for the above tips is not to discourage you from donating, rather it is to give you the tools to make sure those of you who give so willingly are donating to legitimate causes and to make sure your hard-earned money is going to a real charity. 

Please be sure to contact a tax professional if you need help with the above. 

As always, read my disclaimer here. Please consult a qualified tax professional for your unique tax needs. More of my contact information is on my website, www.mntaxsolutionsllc.com.