Conversion is attractive mainly because withdrawals from Roth IRAs, unlike those from traditional IRAs, are tax-free.

Moreover, Roth IRAs also have no withdrawal requirements; traditional IRAs require investors to begin making withdrawals at age 70½.

Basically contributions to a Traditional IRA can create a current tax savings while Roth IRA contributions can save you money in taxes later.  So the decision lies in the ability to save on your income taxes and this can be a tricky formula to figure out.  You should always consult a Financial Advisor before making these decisions; if you do not currently have one or are interested in finding a new advisor follow this link to find out about all the Financial Services offered at R&G Brenner.

“The biggest question advisers have to ask is whether paying taxes is feasible for the investor right now,” says Michele Grant, a Roth IRA expert at Wells Fargo & Co.

Investors “don’t want to use funds from the IRA to pay the taxes,” she says, because that eats into retirement savings. “So do they have the funds elsewhere? And if so, what does that do to them liquidity-wise immediately?”

Ms. Grant says that given the economic downturn, a lot of investors simply don’t have the money to pay the taxes up front. But that needn’t nix the idea of a conversion altogether, she says. For some investors, converting to a Roth IRA gradually, over a number of years, might spread out the tax impact enough to make it affordable.

The tax rates are anticipated to go up over time and this is the reason why some people would prefer to pay the tax now at what is believed to be a lower rate.  For many this is not the case because adding to taxable income increases the taxpayer’s current tax bracket.

… taxes for the wealthy are going up, but very few people have as much income in retirement as they do in the height of their working years,” says Thomas Wiggins, a financial adviser with Rehmann Financial who is based in Troy, Mich. “Even if taxes do go up, investors will likely be in a lower income bracket once they start taking distributions from their retirement fund.”

So there is no simple answer as to which would be better for you.  The fact is that taxes will never go away so planning is important to make sure that the decisions made will have the most beneficial outcome when it comes to tax savings.

Source: Wall Street Journal

Here are some last minute tips:

• If you owe taxes and are mailing in your returns, be sure the envelopes are postmarked by 11:59pm on April 15th.  If they are not, you will be subject to late filing penalties and interest
• If you owe taxes and need to file an extension because you are not ready to submit your returns, we can help you.  Remember, an extension does not preclude you from paying your taxes.  They must be sent along with the extension before 4/15
• Be sure to put primary & secondary (if applicable) Social Security numbers on any checks sent as payments
• Keep all personal return back up documentation of your deductions for a minimum of 7 years.  Keep all documentation for Business Tax Returns FOREVER.
• If you have not filed a 2006 tax return, or plan on filing an amended 2006 tax return, they also must be submitted before 4/15.  Any 2006 return submitted after this date will not be accepted, and all potential refunds will be forfeited
• If you are due a refund, no worries!  You have three years to file.  So don’t kill yourself trying to get your taxes filed by the 4/15 deadline
• If you filed your taxes yourself R&G Brenner is offering a free review of your self-prepared tax returns.  If your return can be amended to your benefit, we will reduce your quoted fee by the retail amount you spent on your software.  This is especially pertinent for TurboTax filers as it has come to light that their program is miscalculating tax returns.

If you have any other questions, please do not hesitate to contact us.

Thanks again and see you next year!

Benjamin K. Brenner, PRESIDENT

Tax time is one of the most stressful times of year for everyone. Besides worrying about possibly owing even more than you’ve already paid, there’s always the question of figuring out exactly how you’re going to get your taxes filed. Aside from a few whiz kids, I don’t know very many people who feel comfortable doing their own taxes from scratch. Some depend on a personal accountant, some depend on a calculator-savvy friend, and some just walk into the nearest H&R Block, Jackson Hewitt or R&G Brenner with an envelope stuffed full of receipts and a look on their face that says, “HELP ME!”

Lots of people have gotten the hang of using tax-prep software like TurboTax or Quicken, and these programs have become a reliable and easy way to get your taxes out of the way. But could going to a tax professional get you a bigger refund? Hiring a professional to do your taxes can be expensive, so how do you know whether it’s worth it?

Self-Employed? Call in the Pros

A good rule of thumb is that the more complicated your taxes are, the more likely it is that you would benefit from professional tax preparation. Ronald Seely, a senior tax preparer at Liberty Tax Service in San Francisco, says that professional help is best for “anyone who has income on a 1099 miscellaneous form … the self-employed, freelancers, and independent contractors.” Wages on a 1099 haven’t had any money withheld, so there are all kinds of taxes to pay — sometimes up to 40 percent of the total amount. That’s where a professional can help, Seely says. “We can find deductions to help with that.” You’ll be claiming deductions for business expenses, and it’s best to have a qualified tax preparer help you discover new deductions and find new ways to save money. If you’re a freelancer, going to a tax professional will help you get a refund that is well worth the cost of their service.

Higher Income = Higher Deductions

If you receive W-2 wages, you should think about professional help if you earn a large salary. If you earn $70,000 to 80,000 per year or more, it might be better to itemize your deductions in order to get the maximum refund and accountants can help you do that. People earning large salaries are also more likely to have taxes on investment income or rental property, as well as deductions like charitable contributions, all of which should be sorted out by a pro.

If you receive W-2 wages, but also have a significant amount of out-of-pocket expenses for your job, you’re a good candidate for tax help. If you do a lot of driving for your job, but are not reimbursed for mileage, if you have a home office, or have any other kind of legitimate business expenses, then you’ll want to claim those as deductions, and having professional help ensures that you won’t miss any opportunities to get money back.

Life-Changing Events Change Your Taxes, Too

Even if your taxes are usually pretty black and white, there are a few times in life when it’s a good idea to get a professional’s opinion. If you’ve just had a baby, bought a house, taken money out of a 401(k), or gotten married, there are tax implications that you’ll want to get help with and a professional tax preparer can help you become familiar with the kind of deductions you’ll be taking from now on. You’ll also get special consideration if you are in school or have recently moved for a job.

Source: Minyanville

Some people may not have filed because they had too little income to require filing a tax return even though they had taxes withheld from their wages or made quarterly estimated payments. In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim the refund within three years, the money becomes property of the U.S. Treasury…

By failing to file a return, people stand to lose more than refunds of taxes withheld or paid during 2006. For example, most telephone customers, including most cell-phone users, qualify for the one-time telephone excise tax refund. Available only on the 2006 return, this special payment applies to long-distance excise taxes paid on phone service billed from March 2003 through July 2006. The government offers a standard refund amount of $30 to $60, or taxpayers can base their refund request on the actual amount of tax paid. For details, see the Telephone Excise Tax Refund page on IRS.gov.

In addition, many low-and-moderate income workers may not have claimed the Earned Income Tax Credit (EITC). The EITC helps individuals and families whose incomes are below certain thresholds, which in 2006 were $38,348 for those with two or more children, $34,001 for people with one child and $14,120 for those with no children. For more information, visit the EITC Home Page.

So if you thought you did not make enough income to file a tax return for tax year 2006, you may have money due to you.  The median refund for 2006 is $604, and in this economy every penny counts.  If you haven’t filed a 2006 tax return, contact an R&G Professional today and we will help you determine if any of these unclaimed refunds belong to you.

Source: IRS.gov

Your employee withholding is the amount of taxes your employer withholds from your paycheck for tax purposes.  In the absence of credits/deductions, the majority of a taxpayer’s refund comes from an overpayment of this withholding.  Hence the term “Tax Return”.  Asking your employer to slightly increase your weekly withholding, can make a significant difference in your future tax returns.

This is especially important now because the IRS has made changes to their federal with holding tax tables. The new Working Pay Credit aims to off-set the decrease in tax withholdings.  However, not all employees will qualify for this credit, which means that those who are normally accustomed to a refund, can wind up OWING taxes.

Most wage earners will benefit from larger paychecks in 2009 and 2010 as a result of the changes made to the federal income tax withholding tables to implement the Making Work Pay tax credit. However, some people may find that the changes built into the withholding tables result in less tax being withheld than they prefer.

If you’re not eligible for the Making Work Pay tax credit, withholding changes could mean a smaller refund next spring. A limited number of people, including those who usually receive very small refunds, could in some situations owe a small amount rather than receiving a refund. Those who should pay particular attention to their withholding include:

• Pensioners
• Married couples with two incomes
• Individuals with multiple jobs
• Dependents
• Some Social Security recipients who work
• Workers without valid Social Security numbers

The Making Work Pay tax credit, normally a maximum of $400 for working individuals and $800 for working married couples, is reduced by the amount of any Economic Recovery Payment ($250 per eligible recipient of Social Security, Supplemental Security Income, Railroad Retirement or Veteran’s benefits) or Special Credit for Certain Government Retirees ($250 per eligible federal or state retiree) that you receive. If you are affected by this reduction, you should review your withholding to ensure that sufficient funds have been withheld to meet your tax obligation.

Click HERE for more information on who qualifies for the Making Work Pay tax credit, withholding information for employees & employers, as well as special penalty relief for taxpayers.

This all boils down to the personal preference of the taxpayer.  If you are accustomed to a refund and do not qualify for this new credit, or simply wish to have a bigger refund come tax time, then it is a very good idea to increase your withholding.  If you require those additional fund to make end meet weekly, then you must do what in necessary.  However, this may mean smaller refunds than you are accustomed to and even the possibility you will owe taxes.

Contact an R&G Brenner professional today for more information and assistance.

Source:  IRS.gov

TAXES can make people do silly things, like investing in chinchilla and ostrich ranches or, over the last several years, buying a second home — which was a bad move just about anywhere in the United States.

For some folks, buying tax-preparation software may be nearly as wrong-headed…And if your taxes are complicated, you may be better off enlisting a professional’s help.

Obviously, R&G Brenner’s business depends on paid tax preparers, therefore it will not shock anyone that I agree with the above statement.  For  those with no experience with tax law it is almost NEVER a good idea to attempt to self-prepare your taxes.  This is where those who think they are saving $100-$200 dollars could be costing themselves thousands of dollars.  Adding dependents, itemized deductions, multiple W2’s/1099’s, unemployment income or rental income drastically increases the complexity of tax returns.  And regardless of how good the automated step-by-step instructions are in do-it-yourself software is, they routinely miss deductions and credits which can dramitcally affect this size of one’s refund or the amount of taxes owed.

About three of every four filers receive a refund, and filing online can accelerate the process. You must use software, either personally or through a preparer, to file electronically, and e-filers can see their refunds in as few as 10 days, Mr. Williams said. Mail filers typically wait at least six weeks.

At R&G Brenner we do NOT charge any additional fees to file electronically.  A lot of firms like H&R Block continue to charge extra fees to e-file.  Read the fine print.  Depending on which version of do-it-yourself software you use, there can be additional charges to e-file and that needs to be factored into the bottom line.  And heaven forbid you need to file multiple states or you buy a software package that doesn’t include the forms you require.  This all equates to more fees than the enticing low pricing  they advertise or the lure of a “free” tax return.  Not to mention the actual time-factor involved!  But I will leave that for a little later…

Before you buy a tax-preparation program, understand that it won’t be a panacea. You still have to keep good records — they matter mightily if you’re audited — and, in complicated situations, you may need to research tax laws yourself. The software can’t tell you whether tuition for your Spanish class is deductible, only that job-related educational expenses might be. What’s more, it won’t ease the headache you may get by trying to find answers on the I.R.S. Web site. The agency provides reams of guidance, but the rules can be murky for people who muck about with them only occasionally — even pros…

The biggest shortcoming in each program isn’t what’s in it but what’s not: You’ll have to laboriously enter your personal data. If you’ve used tax software previously, you can transfer some of your information. But you’ll need to update entries to reflect last year’s earnings and expenses, and that takes time.

Well said.  Just because you buy tax software doesn’t mean that your taxes are going to magically prepare them self.  Someone (you) is going to have to dive into all your receipts and expenses to organize them and determine what is deductible and what is not.  The rules change if your are an employee, independent contractor, self-employeed or a combination of the three.  Furthermore, all tax software has to be approved for release BEFORE the beginning of the current tax season.  The biggest problem we see with this is that many tax laws are not completely settled on before January 1st.  Thus, no tax software is ever fully complete out of the box.  For example, the IRS ruled that charitable donations for earthquake related relief for Haiti was ruled deductible for tax year 2009 if made before February 28th of this year.  There is no way do-it-yourself software will know this unless you continually apply updates as they are released.  Failing to install updates can have serious consequences in the miscalculation of your tax return.  It could take years for the IRS and/or state to catch those mistakes.  And for those that owe taxes and do not pay all that is due, it could result in high penalties and accrued interest…sometimes more than your tax liability itself.

As your taxes become more complicated, the programs’ guidance can become less helpful…My wife and I, for example, moved from Philadelphia to Massachusetts in 2008 and, as a result, paid state and local taxes in several places last year. Philadelphia alone imposes a variety of taxes on the self-employed, and I managed to get tangled up trying to record all of them. In both programs, I had to jump back and forth repeatedly between the interview and the underlying forms to ensure I got them right. In several instances, I had to override the interviews and record information directly to the returns.

This is playing with fire.  Yes, sometimes the only way to deal with a unique tax situation is to manually override the warnings that are specifically designed to prevent errors.  If you do not know the tax laws of these special situations, you are asking for trouble.  The consumer do-it-yourself tax programs are bogged down with thousands of “error” notifications which can make even a simple override harrowing and nerve racking.  At R&G Brenner we do not use these overly simplistic tax programs.  We use an industrial tax program specifically designed and integrated to handle every state in the union that imposes an income tax.  There is rarely a need to override a program verification error…but when there is, you can rest assured our professionals know when to do it.

[No do-it-youself tax program] is certain to deliver you from tax-time stress. It’s the hard questions, like puzzling through the alternative minimum tax, that eat up the most time and cause the most worry. When you grapple with those, you may still be gulping antacids and aspirin come April 15.

The biggest factor in preparing your own tax return aside from the stress of organizing your records, determining witch tax laws apply to you & overriding the program is the TIME you MUST devote in learning all this stuff; and in many cases your time is way more valuable than small fee  you could have spent having a tax professional prepare your most important annual financial document.  Unfortunately, the recent economic crisis has put a lot of people out of work and thus they have a lot more time to attempt to prepare their own taxes.  However, just because you can, doesn’t mean you should.  There are a lot of people out there that love to cook for themselves.  But even that takes practice to become adept at it.  I find it mind-boggling how many people are willing to take the risk preparing their own taxes without any prior experience.  If you miscalculate your taxes in the IRS’ favor, they are not going to contact you saying “you qualified for this credit, so here’s an extra $1000″.

If you are one of the many that has attempted to prepare your own taxes, don’t worry.  At R&G Brenner we offer a FREE consultation for your current years taxes as well as a FREE review of your prior three year’s returns.  We will only quote you a fee if we can do better.  Furthermore, we have a tax software trade-in whereby we will reduce our quoted fee by the retail amount you paid for your software.  We also offer many more attractive promotions that will save you time and money (including a FREE tax return when your refer 3 new clients).  So when it comes to your tax return leave it to the Professionals.  No need to take unnecessary risks.  Go Green – Go R&G Brenner.

Source: NY Times

Two other states–Hawaii & North Carolina–have already informed their taxpayers that refunds could be held as long as July!  New York state may soon follow suit if they can not resolve the projected $8.2 Billion budget gap by April 1st.  And with the State Senate at a stand still, and continuous infighting between NY legislators and Governor Patterson, it appears almost certain that New York will also be forced to delay over $500,000,000 in state refunds.

NY State has until June to issue all refunds before they must pay out interest.  However, this is little comfort for struggling & out-of-work NY taxpayers that need these refunds just to make ends meet.

“The refund checks amount to money that belongs to taxpayers. They haven’t given the state permission to manage it for them,” said an editorial in North Carolina’s News and Record newspaper. “[The state] should have anticipated and planned for shortfalls. Time is money, and the money should be returned to its rightful owners on time.”

Both New York and North Carolina point out that delays will not apply to those returns that have already been filed. New York has paid out $293 million in refunds so far to 281,000 taxpayers; North Carolina has issued more than $400 million.

However, since the majority of taxpayers have not yet filed, these refund delays will affect the majority of NY Taxpayers.  This is not right.  NY Taxpayers pay on time, their refunds should be distributed on time.  We here at R&G Brenner recommend that if you are able to file your tax return and have not yet done so, to file as soon as possible to avoid having your refunds delayed.

Sources: ABC News, AOL News, Newsday, NY Post

The IRS encourages buyers seeking the homebuyer credit to sign the settlement statement when they file their tax return — even in cases where the settlement form does not include a signature line.

When the IRS “encourages” something, it is highly recommended that taxpayers follow their instructions; especially if you want your tax return processed without unnecessary delays.  R&G Brenner has learned through first hand communications with the IRS that their auditors are being stretched thin due to the increased scrutiny of the FTHC.  Virtually all of their other duties including correspondence and desk audits have taken a back seat; not good news for taxpayers that are waiting on an IRS determination as this has added processing time to an already long and laborious process.

R&G Brenner recommends that all taxpayers planning on claiming the FTHC for tax year 2009, familiarize themselves with all the neccessary documentation and the signatures the IRS is requiring.  You can do so by clicking on the source links below.  If you are an R&G Brenner client, be sure to review the requirements with your tax professional before you send your tax return to the IRS.

Source: IRS.gov & IRS.gov

• The Child Tax Credit is set to decrease from $1,000 per child in tax year 2009 and 2010, to $500 per child in 2011. If you and your child(ren) qualify, it offers a hefty tax cut — especially this year. Remember that a credit is better than a deduction, since it reduces your tax bill dollar for dollar. If you’re in the 25% tax bracket, a single eligible credit is like having $4,000 of taxable income erased. If you have three children … well, you get the ide
• There’s a “Making Work Pay” credit that can put as much as $400 in your pocket (or as much as $800 for married folks filing jointly). It represents 6.2% of earned income, for those who qualify based on adjusted gross income. You may already have seen its impact via a reduction at work in your withheld taxes.
• The maximum IRA contribution for those who qualify is actually staying the same for 2010 — it’s $5,000 for most of us, and $6,000 for those 50 or older. IRAs are good places to stash dividend-paying stocks such as Lockheed Martin (NYSE: LMT),DuPont (NYSE: DD), or Chevron (NYSE: CVX). If you play by the rules, Roth IRAs will let you withdraw everything tax-free — making them especially attractive places to park stocks you expect to soar.
• Because of low inflation, some feared that contribution limits for 401(k) accounts would be lowered for 2010, since they’re supposed to be adjusted in line with inflation. But they remain the same in 2010, at $22,000 for those 50 and older, and $16,500 for the rest of us. Apparently, Uncle Sam is taking pity on the many of us who have not saved enough, and helping older Americans try to catch up.
• The Wall Street meltdown that knocked huge companies like Citigroup (NYSE: C) andAIG (NYSE: AIG) for a loop also battered gobs of homebuyers, some of whom had a portion of their mortgage debt forgiven. Under standard IRS rules, the value of that aid would count as taxable income, but the Mortgage Forgiveness Debt Relief Act waives that, for those who qualify. That’s a very big deal; if you had $40,000 of debt forgiven, a 25% tax on that would amount to $10,000!
• Similarly, unemployment income is usually taxable — but for 2009, you can exclude the first $2,400 you get.

Source: The Motley Fool

In the absence of this form, taxpayers (especially those that self-prepare their returns) run the risk of neglecting to include their previous state refund on their 2009 tax return this year, which could result in a delayed refund and potential penalties and/or interest as it could take years for the IRS to notify taxpayers of errors. Furthermore, NY State has delayed many refunds over the last year and a lot of NY taxpayers have yet to receive their 2008 refunds.  In this case, one would NOT have to claim their 2008 NY refund on their 2009 tax return.  Very confusing, I know.

All returning R&G Brenner clients will not have any problems relating to this as our tax software was specifically programmed to carry over the necessary information to your 2009 tax returns.  However, for non-clients that would like to obtain 1099-G information, you can do so by:

1. Getting it online by CLICKING HERE
2. Calling (866) 698-2946

Source: NY Department of Taxation and Finance