So, if your teen is getting a job over the summer (to pay for their video games and Nikes), remind them of withholding payroll taxes and other items related to them. The IRS has a tip for students with summer jobs; see the link below: http://content.govdelivery.com/accounts/USIRS/bulletins/10a442d?reqfrom=share An important thing for them to remember is that if they are your dependents they can earn $6,200 without paying any income tax, and if they can take their own dependency exemption they can earn over $10,000 without income taxes, so have them adjust their income tax withholding accordingly (social security, medicare tax and many local and state taxes will still be withheld, explaining why their check is so much smaller than what they thought they were going to get.) It might be a good idea to have them set up a Roth IRA with some of the money, which will get them started on their retirement savings (just a thought!) For financial, accounting and tax musings, You can count on us to count for you! Email: bstonercpa@sbcglobal.net Phone: 818-317-6035 Website: www.briantstonercpa.com Android and the IPhone: Has been Featured On https://twitter.com/bstonercpa
Tax Musings of a Burbank CPA: Be Careful Converting Non-Deductible IRA Contributions to Roth IRAs
The new fad in IRA contributions is for taxpayers who have too much income to make a Roth IRA contribution to make a non-deductible contribution to a traditional IRA, then convert this to a Roth IRA. A loophole in the tax code (for now) allows this conversion to a Roth without income tax consequences. But be careful! If you already have traditional IRA accounts, trying to make this conversion can have unintended tax consequences, because all traditional IRA balances (including non-deductible contributions) are all lumped together when making distributions or conversions to Roth IRAs. See this posting in MarketWatch by Dan Moisand to get more details on this: www.marketwatch.com/story/why-you-cant-convert-a-nondeductible-ira-into-a-roth-ira-2015-06-05 So say you have $45000 in traditional IRAs, of which $25000 is contributions and $20000 is earnings. You make a $5000 non-deductible IRA contribution, which you then convert to a Roth IRA. No earnings to pay tax on, right? Wrong; you now have $50000 in traditional IRAs and only a $5000 basis (because you took a $25000 tax deduction for the original IRAs). So you owe tax on $4500 of the $5000 ‘non-deductible’ contribution. This will continue each time you try this conversion technique. I am bringing this up as an [...]
Musings of a Burbank CPA: Can states boost growth by cutting individual tax rates for the rich?
So, does reducing income taxes increase growth on a state by state basis? In the past people wanting lower taxes have said yes, people wanting higher taxes have said no. This article by Howard Glickman in the Christian Science Monitor says in actuality, it depends on the tax, the state and the economy in a lot of cases. You can see the article here and decide for yourself: http://www.csmonitor.com/Business/Tax-VOX/2015/0505/Can-states-boost-growth-by-cutting-individual-tax-rates-for-the-rich?utm_campaign=Daily+Clips&utm_source=hs_email&utm_medium=email&utm_content=17540178&_hsenc=p2ANqtz–2Gcdjpb0i8dcVumNJ4_T3WT3ITLphBclafjZ0B7Bur0pBrISa4YUY3nkMYhktLFTa1iumXWZUB5yb2mJ_L_VQkMv1uQ&_hsmi=17540178 It is interesting that property taxes have more positive economic effects that income taxes. Guess more testing is necessary to come to a consensus, since there are many still on both sides of the fence (like economists telling us where the economy is going, or weathermen telling us if it is going to rain next week.) For financial, accounting and tax musings, You can count on us to count for you! Email: bstonercpa@sbcglobal.net Phone: 818-317-6035 Website: www.briantstonercpa.com Android and the IPhone: Has been Featured On https://twitter.com/bstonercpa