Recently in Taxes Category

The days are getting shorter and mornings are cooler; school buses are now encountered as part of the morning commute. Fall is upon us and colleges will soon be in full session. Following are some tax tips that parents and college students may find helpful come next spring to take full advantage of tax deductions and credits for families who of college students.

1.    Save all receipts related to attending post-secondary educational institutions.

2.    Students who are under age 24 at the end of the year and enrolled full-time (at least 5 months) can and should be claimed as a dependent on their parent's federal income tax returns.

3.     American Opportunity Credit can be up to $2,500 per eligible student and for the first four years of post secondary education. Forty percent of this credit is refundable, which means that you may be able to receive up to $1,000, even if you owe no taxes. Qualified expenses include tuition and fees, course related books, supplies and equipment. Eligible taxpayers have modified adjusted gross income is below $80,000 ($160,000 for married couples filing a joint return).

4.    Lifetime Learning Credit can be up to $2,000 (20% credit) for qualified education expenses of up to $10,000 paid for a student enrolled in eligible educational institutions. There is no limit on the number of years you can claim the Lifetime Learning Credit for an eligible student, but to claim the credit, your modified adjusted gross income must be below $60,000 ($120,000 if married filing jointly).

5.    Tuition and Fees Deduction can reduce the amount of your income subject to tax by up to $4,000 for 2011 even if you do not itemize your deductions. Generally, you can claim the tuition and fees deduction for qualified higher education expenses for eligible students if your modified adjusted gross income is below $80,000 ($160,000 if married filing jointly).

6.    Student loan interest deduction if your modified adjusted gross income is less than $75,000 ($150,000 if filing a joint return), you may be able to deduct up to $2,500 in interest paid on loans used to pay for higher education.

You cannot claim the tuition and fees deduction for the same student in the same year that you claim the American Opportunity Credit or the Lifetime Learning Credit. You must choose to either take the credit or the deduction and should consider which is more beneficial for you. The American opportunity credit is calculated per student while the lifetime learning credit, tuition and fees deduction and student loan interest deduction are all calculated per household/tax return.

For more information, visit the Tax Benefits for Education Information Center at or check out Publication 970, Tax Benefits for Education, which can be downloaded at or ordered by calling 800-TAX-FORM (800-829-3676).. Penn State Extension's Your Money Your Taxes website will also provide you with additional information about federal and Pennsylvania income taxes.

Penn State is committed to affirmative action, equal opportunity and the diversity of its workforce.

June: Weddings and..... the IRS?


In America, June is often thought of as the first choice of months in which to be married. If you are planning to marry soon one of the more unromantic aspects you should handle before or soon after the wedding has to do with the IRS. The following seven tips for newlyweds can help decrease stress come tax time!

1.     Prior to filing your next tax return, notify the Social Security Administration of any name change to assure you receive your new card with your new name. Use form SS-5 which can be downloaded from, or obtained by calling 800-772-1213 or from a local Social Security office. Take the completed form and required supporting documents to your local SSA office.

2.     Request and complete a change of address from with the US Postal Service to assure you receive any IRS correspondence or refunds.

3.     Also notify the IRS if you move by downloading form 8822 from website or obtain by calling 800-829-3576

  1. Report name and address changes to your employer(s) to make sure you receive your Form W-2, Wage and Tax Statement, after the end of the year with the correct identifying information.
  2. To avoid a nasty surprise of owing the IRS at the end of the year, use the IRS online withholding calculator to determine the correct amount of withholding required for your new filing status and household income. The calculator will also give you information necessary to complete a new Form W-4, Employee's Withholding Allowance Certificate. You can fill this form out and print it and then give to your employer to assure they withhold the correct amount of taxes from your pay.
  3. Consider using the form 1040 - the "long form" to maximize all tax deductions, allowances and credits you may be eligible for.
  4. Regardless of when you married, the IRS uses your marital status on December 31 to determine if you were considered married for the year. While you are not required to file jointly you're your spouse, in most circumstances filing jointly is most beneficial resulting in paying the lowest tax.


Talking Taxes

| | Comments (0) | TrackBacks (0)

Talking Taxes


April 15 is the annual deadline for filing your federal and Pennsylvania State Income Tax returns. Now is a great time to use these documents to assess your financial situation and plan for your 2011 income tax bill. If you received a refund, do you know why? Take some time to review your return.


Let's start with your adjusted gross income. Do you expect your income to increase or decrease compared to last year? One way to decrease your AGI is to contribute to an employer sponsored retirement plan or contribute to a traditional IRA. Self-employed individuals also have the opportunity to contribute to several other types of retirement plans that allow for tax avoidance today.


Next consider how many personal and dependent exemptions you will have. Each household member is worth $3,650 in exemptions. In other words for a family of four - $14,600

Also consider your filing status. Married filing joint and under age 65 is $11,400, if both are age 65 or over $13,600.


Children under the age of 17 are worth $1,000 in child tax credit. If your child will turn 17 in 2011, your income tax bill could be increased by this $1,000. Children who are enrolled in college and meet certain guideline can qualify their household to receive up to $2,500 in the American Opportunity Tax Credit, $1,000 of which is refundable. In order to receive this credit the household must claim the student as a dependent - which parents can do as long as the student is under age 24 and considered a full-time student for at least 5 months of the year.


Retirement savers credit - if you meet income guidelines, contributions to employer sponsored retirement plans, traditional IRA's and even Roth IRA's can be included in calculating this credit which reduces your tax bill.


Earned income tax credit - whether you work for someone else or for yourself - if you have earned income and meet income guidelines, you may be eligible for this tax credit, even if you don't owe any federal income taxes!


Your 2011 federal income tax bill may be up to $800 more than your 2010 bill due to the expiration of the "Making Work Pay" tax credit. This credit was calculated as 6.2% of your earnings up to a $400 limit per worker. While you won't see it on the 2011 tax return, somewhat in lieu of this credit a change was made to your federal social security tax withholding. Normally the employee share of contributions made to Social Security is 6.2% of wages up to a certain income limit. For tax year 2011 ONLY, this has been reduced to 4.2%. You may have noticed a slight increase in your paycheck at the beginning of the year. Remember, come January 1, 2012, your check will be reduced by 2% as your contribution to Social Security will increase from 4.2% to the usual 6.2%.


Finally, if your refund includes paycheck withholdings, consider making adjustments to your W-4 form filed with your employer. Completing that simple form confuses many workers and the IRS is trying to make it less so. has a link to an online withholding calculator that will help you determine the correct income tax withholding for your situation. If you do decide to change your withholding to reduce the amount of taxes taken from each pay (stop paying taxes you don't owe!) also make plans for what you will do with this newfound money. These funds could be used to establish or increase your emergency fund, pay off credit card balances, pay off other types of debt or maybe even help fund a well-deserved vacation.


For more details on income taxation, check our extension website



This is my sixth year to coordinate the Internal Revenue Service Volunteer Income Tax Assistance Program (VITA) in my four-county service area of Cameron, Elk, McKean and Potter counties. In addition to training and monitoring volunteers, I also spend February, March and part of April interacting with clients on a one-to-one basis completing their federal and state income tax returns as well as rent and property tax rebate forms for those who are eligible. I use this opportunity to not only help them meet their legal obligations, but also as a teachable moment to help increase their financial literacy and skills.

Just yesterday I shared with a single mom of four that next spring, when she is filing the FAFSA (Free Application for Federal Student Aid) form for her first college-bound student, she could use information from her 2010 tax returns and later, once her 2011 return was completed she could go back and amend the information she inputted. There are various deadlines to filing the FAFSA, but folks have until April 15 to file their federal return and can also file an extension, making the return due in October. People who don't understand the system panic and may seek the services of a paid preparer in order to meet the FAFSA deadline. For many of the clients I see, tax preparation bills can exceed $200, money that could be better used to meet family obligations.

So the primary reason I got involved with VITA is that I don't believe you should have to pay someone else to help you meet your legal obligation of filing an annual income tax return. The tax system has become so complex and confusing, even calls to the IRS for assistance have been documented as resulting in receiving erroneous information. Additionally, beginning for the 2010 tax season, the IRS as well as Pennsylvania have foregone mailing income tax packages to taxpayers - forcing them to either use computers or seek the services of a paid preparer to get their forms. Many of the folks I interact with either don't have computers or lack the requisite skills to use them to prepare their returns. Many have disabilities or limited education and lack the sophistication to follow-through on their legal obligation.

Yesterday I had a retiree come for her VITA appointment, Her TOTAL 2010 income was $10,000 or so in social security retirement benefits, under $3,000 in pension benefits plus she had won $5,000 from the Pennsylvania Lottery (don't even get me started on that topic!) We ask that VITA clients bring last year's tax returns which sometimes provides additional information required for proper preparation of this year's return. She had seen a paid preparer last year who charged her $75 for their services. In reviewing that return I discovered her financial situation was the same as this year, except for no lottery winnings. Because of the sources and amounts of her income SHE WAS NOT REQUIRED TO FILE EITHER A FEDERAL OR STATE INCOME TAX RETURN. SHE PAID $75 UNNECESSARILY! Because she is under 65, her standard deduction is $5,700 and her personal exemption is $3,650 - added together, her first $9,350 is TAX-FREE - in this case her income was so low that her social security benefits didn't factor into her taxable income. Because her winnings were from the Pennsylvania Lottery, that is not taxable and Pennsylvania doesn't tax pensions or social security.

I didn't have the heart to tell her about the futility of her $75 spent on returns that weren't necessary - plus I also kept to myself that the paid preparer had reported her pension on her last year's state return. $75 may not sound like much to some people, but this was money she could ill afford to pay. What is done is done. I did explain to her the filing requirements and informed her that unless she returned to work, or the tax laws change, she would not have a filing requirement for either the federal or state.

Another tax return preparation season is upon us and this is my sixth year of involvement with the IRS sponsored VITA (Volunteer Income Tax Assistance) program. I use tax preparation as a teachable moment to individualize education to families based on their unique set of financial circumstances. I help them understand the income tax code, but also develop strategies to reduce debt and save toward goals such as retirement, home purchase or post-secondary education. In addition to preparing federal and state income tax returns, the software also enables us to prepare Pennsylvania's Rent and Property Tax Rebate forms.

On Thursday, I assisted an elderly couple with preparing their rebate forms. They showed me a solicitation letter they received in the mail that, while not a scam per se, was very deceiving. Starting with a Harrisburg Address - while the letterhead also indicated they were a non-governmental agency, the letter looked very official including a client number. It also indicated they could be eligible for $975 rebate - this is only in effect for larger cities such as Philadelphia and Pittsburgh. In red lettering it indicated the need for action by March 18. In reality, the deadline for filing this form is June 30 and for the past few years the deadline has been extended to December 30. The kicker for me was, they were going to charge $39 if paying by check or $41 if paying by credit card to prepare the forms. AND clients were to prepay before any work was done!

Not only can seniors get these forms completed for FREE at VITA sites like mine, TCE (Taxpayer Counseling for the Elderly - another IRS program)sites and even state representative and senator office employees can assist in preparing the forms... again for FREE!

I called Representative Matt Gabler's office and they too had seen the solicitation letter. Mention of it was made in the newsletter they create.

They thought they made a good financial decision. "Why not pay off the car and truck loan with our savings? We will be debt free, won't have to remember to make monthly payments and we'll avoid paying interest on those loans! After all, popular financial gurus advocate being debt free, how could we go wrong? "

 Had they used funds from a savings or checking account, cashed in a CD or taken a distribution from a Roth IRA to pay off these debts there wouldn't have been a problem and I wouldn't be writing this article. Instead this retired couple took a distribution from their tax-sheltered accounts (pensions, 401K or Traditional IRA's.) Upon taking the money from their accounts - the previously tax-sheltered funds were now subject to taxation.

 What follows is a brief explanation of income taxation for retirees. Add up all income excluding Social Security - interest, dividends, rental income, and distributions from IRA have and pensions etc. These are all "subject" to taxation. Continuing with our example - add up Social Security payments. Now add half of Social Security to other types of income. Any amount in excess of $32,000 is also subject to taxation. Up to 85% of social security benefits can be subject to taxation based on other income. From the amount that is subject to taxation - subtract $13,600 which is the standard deduction for a married filing jointly couple who are both aged 65 or older. Subtract another $7,300 which is for two personal exemptions. In other words, of the amount that is subject to taxation - the first $20,900 is tax-free - the remainder is your actual taxable income.

 For our couple under discussion, $9,200 was subject to 10% tax rate resulting in a federal income tax bill of $920. The distribution also increased their income that is used in calculating eligibility for Pennsylvania's Property Tax Rebate Program so they were not eligible for the $250 rebate they would have received had they not taken the large distribution. Added together the $920 and $250 equals a $1,170 mistake.

 As it turns out, the decision to become debt free was much more expensive than paying a few more months of interest. This might be considered a case of being penny wise and pound foolish.

 How can you avoid making a similar mistake? Become more familiar with various savings and investment vehicles and pay attention to how they are treated for tax purposes. Learn more about your personal income tax situation. Even if you pay someone to prepare your tax return, review it to understand how the calculations are performed. Think about putting money in taxable accounts like savings accounts, tax-deferred accounts such as IRA's and 401K's and tax-free accounts such as Roth IRA's (you pay taxes when you invest!) As you pay for expenses in retirement you can control to a certain extent how much tax you pay based on which accounts you draw your funds from.

Important Tax Law Changes for 2010

·         Due date to file is April 18, 2011

·         Health Care Professionals who received canceled debt notices for education loan repayment or forgiveness programs will not need to include that canceled debt as income if due to programs intended to increase availability of health care services in underserved areas or health professional shortage areas. To learn if you are eligible consult your loan program office. This change is part of the Affordable Care Act of 2010 and is retroactive to 2009. You will need to file a form 1040X if in 2009 your canceled debt is now considered an eligible loan repayment or forgiveness.

·         $1,900 is the limit of taxable investment income children can have without it being subject to the parent's tax rate.

·         For households who do not have enough expenses to itemize their deductions, the following are standard-deduction amounts based on IRS defined filing status:

o   $11,400 Married Filing Jointly or Qualifying Widow(er)

o   $8,400 Head of Household

o   $5,700 Single or Married Filing Separately

·         Personal and Dependent Exemptions remain at $3,650 each.

·         Making work pay credit of up to $400 again available this year. Certain households who did not receive the $250 economic recovery payment in 2009 but got it in 2010 will reduce their Making Work Pay Credit by that amount.

·         Earned Income Tax Credit - Maximum income amounts and credit available

o   $13,460 ($18,470 MFJ- Married Filing Jointly) no qualifying child - credit $457

o   $35,535 ($40,545 MFJ) one qualifying child - credit $3,050

o   $40,363 ($45,373MFJ) two qualifying children - credit $5,036

o   $43,352 ($48,362MFJ) three or more qualifying children - credit $5,666

·         2010 is the last year employees could opt to receive up to $1,830 of their earned income tax credit with their paychecks. The IRS is dropping this program because so few workers used it.

·         Additional Child Tax Credit - eligible households could receive this refundable credit if they earned at least $3,000 and had an eligible child.

·         In addition to splitting your refund into up to three separate accounts, you can also purchase up to three U.S. Series I Savings Bonds and receive the balance of your refund as a check or direct deposit to a bank account.

·         Medicare Part D recipients who received a $250 rebate to assist with the "donut hole" drug plan coverage gap do not need to report this income nor pay taxes on it.

·         Standard Mileage Rates:

o   Business Related mileage 50 cents/mile

o   Medical/Moving related mileage 16.5 cents/mile

o   Charitable purposes mileage is 14 cents/mile

·         First Time Homebuyer Credit

o   If you took advantage of the credit in 2008 you must begin the 15 year repayment of that credit

o   For first time homebuyer's in 2010 to qualify for the credit of 10% of the purchase price up to an $8,000 credit, you had to meet the September 30, 2010 settlement deadline. This refundable credit will not require repayment.

·         Up to $13,170 in adoption qualified expenses can be claimed toward the Adoption Tax Credit which is part of the Affordable Care Act of 2010.

·         All unemployment compensation received in 2010 is subject to taxation. For 2009 up to $2,400 could have been excluded from income.

Next month I'll share information about the recently passed tax legislation included in the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010.



The early bird doesn't always get the worm. Moreover, said a consumer-finance expert in Penn State's College of Agricultural Sciences, being in a hurry to file your federal income tax forms in pursuit of a quick refund isn't always the best idea.


Tax-filers eager to receive their federal income tax refund can use the services of commercial, for-profit tax preparers as early as December and thus get a jump on receiving their refunds. Robin Kuleck, consumer-finance educator and director of Penn State Cooperative Extension in Elk County, points out that using this method can have some drawbacks.


"Commercial preparers can complete your income tax return early because they use the data recorded on your last paystub of the year," Kuleck said. "However, this data may be incomplete because your paycheck doesn't show your family's entire financial picture.


In fact, companies that issue certain 1099-MISC forms -- as well as brokers, brokerage firms, and mutual fund companies that issue Forms 1099-B -- have until February 15 to issue these forms, which are required to accurately complete your various tax returns, Kuleck noted.


"As you rush to be the early bird, what may happen is that you'll pay for return preparation and you also may decide to accept a refund anticipation loan, which carries an additional fee," she said. "By late February you then may receive additional information necessary for an accurate tax return. You will be required to file an amended return that includes this new information, and -- you guessed it -- pay yet another fee."


So, how do you go about filing an accurate return while avoiding or minimizing preparation fees? Kuleck said it starts with developing a good recordkeeping system, and knowing what is important to keep. IRS Publication #552, "Recordkeeping for Individuals" answers many common questions.


Families earning less than $49,000 per year are eligible for free income tax assistance through such IRS-sponsored programs as the Volunteer Income Tax Assistance (or VITA) program and the AARP Tax Counseling for the Elderly program. You can locate local VITA sites by visiting the IRS website at (key word "VITA") or by calling (800) 906-9887. Computer-savvy taxpayers can complete their own taxes using free online software.


"Pennsylvania has arranged with some software companies to provide free or low-cost state and federal income tax return preparation to individuals who meet certain requirements," Kuleck said. "There's more information about e-filing at the Pennsylvania Department of Revenue web site (;  click on the "individual" link. Always save a paper copy of your tax returns and supporting documents in your permanent home files -- an important element of your home record keeping system."


More tips and strategies for making the most of your federal and state tax returns are available at the Penn State Cooperative Extension "Your Money Your Taxes" web site (

End of Year Tax Planning

Taxes are imposed not only to generate revenue for various government entities, but can also be used to motivate certain behaviors as well as deter some behaviors. For example, contributing money to your retirement plan is federal income tax-free so that encourages people to save for their future. Pennsylvania imposes a tax on cigarettes as a means to discourage people from smoking. For the purposes of our discussion, let's only talk about federal income tax planning for the end of 2009.

Each year, Congress makes some changes to the tax code based on various factors including the state of the economy. This year is no different. Not all changes affect everyone; some are based on your stage in the lifecycle, your employment status, your income level, or the composition of your household. Taxpayers should also understand the difference between tax deductions and tax credits. Tax deductions are used to reduce the amount of your income that is subject to taxation. A tax credit actually reduces the amount of taxes you pay. Two other important terms to understand are the types of credits - refundable and nonrefundable. A nonrefundable credit will reduce the amount of taxes that you owe stopping when your balance reaches 0. A refundable credit creates the possibility of not only reducing your taxes to 0 but paying you the balance. For example, your tax bill is $500 and you are eligible for one of the nonrefundable credits that are worth $1000. The end result is your tax bill is 0 and you gain no benefit from the unused $500 of the Nonrefundable credit. Using the same example, if your tax bill is $500 and you are eligible for a $1,000 refundable credit, your tax bill is 0 and you receive a refund of the remaining $500 from the IRS.

Refundable and nonrefundable credits

Economic Recovery Payment - This past spring people receiving payments from the Social Security Administration, Department of Veterans Affairs and the Railroad Retirement Board automatically received the $250 Economic Recovery Payment. While this event is not taxable for 2009, it is reportable and could reduce the amount received from another new credit, the Making Work Pay Tax Credit.

Making Work Pay Tax Credit

Refundable - $400 single - $800 married filing jointly claimed on tax return but already benefit due to income tax withholding changes implemented by employers this past spring.

Special Credit for Certain Government Retirees

Refundable $250 for certain government retirees who are not covered by social security.

American Opportunity Tax Credit

For 2009 and 2010 this credit makes changes to the existing Hope education credit by including required course materials to the list of qualifying education expenses and allowing the credit to be claimed for four years instead of two. The maximum amount of the credit is increased to $2,500 per student and up to 40% of the credit may be refundable.

Unemployment Compensation

Taxpayers can exclude up to $2,400 of unemployment compensation from their gross income.

First-Time Homebuyer Credit

IRS definition of first-time homebuyer is that you did not own any other main home in the three years prior to the purchase. Purchase made in 2009, credit is 10% of purchase price up to $80,000. The maximum credit is $8,000 and you must remain in the home for 36 months following purchase.

Sale of Main Home

If in 2009 you sold your main home and neither you nor your spouse used it as a main home then this nonqualified use could contribute to taxation of any gain on the sale or exchange. Previously the rule was that if you sold your main home that you had lived in for 2 of the past 5 years, $250,000 of any gain for singles and $500,000 of gain for couples filing married jointly was excludable from taxable income.

Children Investment income

Children can have investment income of up to $1,900 for 2009 before it is taxed and it will be taxed at the parent's rate.

Standard Deduction for taxpayers who don't or can't itemize has increased - These guidelines are for individuals who are under 65 and not blind or disabled

$11,400 MFJ or Qualifying Widower

$8,350 HOH

$5,700 Single or MFS 

Again this year even if you don't itemize and you paid at least $500 in real estate taxes you can deduct a maximum of $500.

Exemptions have increased to $3,650.

New Vehicle Purchase

If you buy/bought a new vehicle between February 17 and December 31, 2009 you can deduct sales tax and certain fees for the first $49,500 of the vehicle purchase price. The vehicles must be new and could be a passenger automobile, light truck, motorcycle of a motor home.

Earned Income Credit

Married filing jointly households with at least one person working and no children who earned up to $18,440 to households earning up to $48,279 with 3 or more children are eligible for this valuable refundable  credit which can amount to as much as $5,657.

Child Tax Credit

Children age 16 and under qualify households for as much as $1,000 tax credit apiece. Any unused amount from this nonrefundable credit becomes refundable as the additional child tax credit.

Section 529 Accounts

Families who had been investing in section 529 plans to fund college for their kids and are now using those funds to pay tuition and expenses will be pleased to know that the definition of qualified higher education expenses now includes the purchase of computer technology, equipment and internet access that are to be used by the beneficiary and his/her family during the years the beneficiary is enrolled at an eligible educational institution.

Residential Energy Credits

Nonbusiness energy property credit

30% of the cost of qualifying expenses up to a maximum credit limit of $1,500 for improvements placed into service in 2009 and 2010 for homeowners who make energy efficient improvements to their main home. Expenses that qualify include insulation, exterior windows and doors, heating and air conditioning systems, certain roofs and stoves.

Residential energy efficient property tax credit

Solar hot water heaters, geothermal heat pumps and wind turbines that are installed at your main home are eligible for a 30% credit.

Good news for retirees

Recognizing that the economic downturn could be disastrous to retirees who suffered extreme value losses of their investments, for 2009 taxpayers are not required to take the required minimum distribution from their IRA's or most other defined contribution plans. Generally, once you attain the age of 70 ½ you must start taking distributions from your tax-deferred accounts and pay the taxes owed. Some seniors who routinely wait until the end of the year will be pleased to know that if they aren't dependent on this income, they can defer payment until next year.

Thoughts about what to do with your refund.

This year, not only will you be able to divide your refund into as many as 3 separate bank accounts, you will also have the option to use some of your refund to purchase US Savings Bonds - I Series.

The federal tax code allows individuals to save for their retirement with pre-tax money. You avoid taxes while you are working (and possibly in a higher tax bracket) and pay the taxes on the principal plus any interest or capital gains (but not at the capital gains rate since you avoided the tax bit up front) when you withdraw the money usually in retirement (when you possibly will be in a lower tax bracket). So because of this preferential tax treatment of retirement accounts (401K, 403B, Traditional IRA's) you are strongly encouraged to save and invest for your future retirement.

This tax deferral does come with a caveat. By the time you reach the age of 72 1/2 (and you need to read the IRS version to determine exactly when you need to take action) you are expected to take out a certain portion of your investments and pay the taxes on them. This amount is referred to as RMD or Required Minimum Distribution and is based on your retirement assets as well as actuarial figures. IF you fail to take the RMD, there is a 50% penalty of what you should have taken! (More specific details are available on the website) Because these are unique times, RMD for 2009 have been suspended with no penalty for those folks who are in a position to take advantage of this change.

Prior to leaving office, President Bush signed this legislation lifting the RMD requirement for 2009. You should have received information about this change from your retirement account holders. Many of the folks I work with can't take advantage of this legislation - our VITA project showed of the 300+ people we served, including a good majority of retirees, the Average adjusted gross income was under $13,000 PER HOUSEHOLD. But, if you are fortunate enough to be or know someone who is financially stable in retirement, they could take advantage of this provision. This change was brought about due to the Recession to allow folks to avoid "selling at a loss" - People whose retirement investments had lost considerable value would not be forced to sell at the bottom, but to try to ride out the low spot in the economic cycle.

Bottom Line: If you are or know of retirees who DO NOT need to take money from their retirement accounts in 2009 except for the RMD provision, ask them to consider researching the benefits of stopping payments for the remainder of 2009 and how their account holders will deal with their decision. For some retirees, they receive a monthly distribution while others receive an annual one. If they have already taken some distributions, it appears they have a 60 day lookback period where they could return any distributions received in that time frame. If they receive their distribution at the end of the year, they can take action now to prevent this payment from happening. Each household's situation is different so care must be taken to consider how this suspension of RMD for 2009 affects them.

August 2011

Sun Mon Tue Wed Thu Fri Sat
  1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31