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Answer by storeonwheels
Let me explain. You can take the money out of the Roth IRA account at anytime, but you may need to place the money back into the account or you will be taxed. A Roth IRA is a retirement account which requires 00.00 and may be withdrawn when you are 59 1/2. You will not be taxed as long as you take this money out after your 59 1/2. Take the money out before 59 1/2 and you may be taxed. A Roth IRA CD has a higher interest rate than the Roth savings account. Keep your money in here and you can earn more money. The roth IRA accounts(savings and CD) are designed to be withdrawn after your 59 1/2. Please don’t put your money here unless you want to save it for your retirement.

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Sacramento – The state is contacting more than 40,000 California businesses that have not filed their 2008 state income tax returns with the Franchise Tax Board (FTB).

The notices inform the businesses that they have 30 days to file a return or show why there is no tax filing requirement. Businesses that disregard these notices could face tax assessments that may include penalties, interest, and fees.

FTB annually reviews more than 5 million income records received from the Internal Revenue Service, the State Employment Development Department, the State Board of Equalization, financial institutions, and other business entities, then compares that data to tax returns already filed to identify noncompliance. Last year, FTB collected approximately $38 million from non-filing businesses the agency notified.

California faces an annual tax gap of $6.5 billion per year. The tax gap is the difference between taxes owed and taxes paid. The failure to file tax returns is one part of the tax gap along with under reporting of income, overstatement of tax deductions, and the underpayment of taxes owed.

The other day I was talking to a client about IRA withdrawals and decided that I will write about it in more detail because I understand that many of you might be thinking about tapping into your IRA, by choice or law.

3 IRA Withdrawal Rules You Should Know About

1) Early withdrawals

You’ll pay regular income tax as well as a 10% penalty on early withdrawals from your traditional IRA unless an exception applies. Early withdrawals are those you take when you’re under age 59½.

Exceptions that let you avoid the penalty include amounts you withdraw to use for the following:

• certain educational or medical expenses

• medical insurance when you’re unemployed

• building, buying or rebuilding your first home

You may also qualify for an exception to the early withdrawal penalty if you’re a military reservist, or when you inherit an IRA, take nontaxable distributions, or roll over eligible amounts within 60 days of the withdrawal.

2) Required minimum distributions

For 2010, you’re once again required to take distributions from your traditional IRA when you reach age 70½. The penalty for withdrawing less than the required amount is 50% of the shortage.

The required minimum distribution rules also apply when you inherit a traditional or a Roth IRA.

3) Excess contributions

When you deposit more than the allowable maximum contribution into your IRA, you generally need to withdraw the excess along with any earnings by the due date of your tax return. Otherwise you may owe a 6% penalty, which can be assessed each year for as long as you leave the extra amount in your IRA.

The maximum IRA contribution limit for 2010 is $5,000 (plus an extra $1,000 if you’re over age 50) or your earned income, whichever is less.

Sacramento – The Franchise Tax Board (FTB) announced today that it will stop accepting applications for the First-Time Buyer Credit at midnight Sunday, August 15, 2010.

As of August 4, FTB has received 31,460 applications. Because some of the applications are invalid or duplicates, FTB will continue to accept them through August 15, to ensure that enough valid applications are received to properly allocate the full $100 million of tax credit. FTB estimates that it can award approximately 17,500-20,000 credit certificates to unique and valid applicants. However, once the funds are exhausted, any remaining applications will be denied.

The State is providing $100 million in tax credits to first-time home buyers. The credit will be allocated on a first-come, first-served basis using the date and time stamp on the fax submission, until the money is exhausted. The tax credit is available to those who purchased a qualified principal residence and did not own one during the last three years. This credit is five percent of the purchase price or $10,000, whichever is less. Taxpayers must claim the credit on their tax return in equal amounts over the following three tax years.

To apply, the buyer must complete and fax an FTB Form 3549-A, Application for New Home / First-Time Buyer Credit, along with the final settlement statement. It must be faxed to FTB within two weeks (14 calendar days) after the close of escrow. The fax number is 916.855.5577.

Taxpayers must receive a certificate of allocation from FTB to claim the tax credit on their California personal income tax return. FTB expects to send the allocation certificates over the next few months starting in August.

California homebuyers still have time to qualify for the state’s other $100 million home tax credit for the purchase of a new home. The New Home Credit is available for taxpayers who purchase (close escrow) a new home on or after May 1, 2010, and before August 1, 2011, as long as they enter into an enforceable contract executed before January 1, 2011. The seller must certify that the home has never been previously occupied.

For more information visit ftb.ca.gov

According to the IRS, the “tax gap” exists because of the complications of reporting rental income and expenses. It is not just you; the tax law related to rentals is simply too complex.

There are three things you should know about rentals because the rules are little different from what you might expect.

Depreciation

In most cases, you can immediately expense an asset using expensing rules, also called Section 179. Using these rules, you write off the cost of business assets in the year you purchase them. Unfortunately, Section 179 is not available for residential rental property. Typically, you’ll depreciate residential rentals over 27.5 years. Appliances, carpeting, and furniture are depreciated over 5 years.

When rental expenses exceed income, the loss may not be deductible on your current year federal income tax return. Your income level and your participation in managing the property affect the deduction of any losses.

Losses you’re unable to use in the current year are “suspended.” Suspended losses can be applied against income from your rental in future years and can also reduce gain when you sell your property.

Sale of rental property

Depending on how you acquired your rental, the tax basis — the amount used to calculate gain or loss when you sell — may not be your cost.

For instance, say you used the property as your personal residence before renting it. In that case, your basis could be the fair market value of the home on the date you converted it to a rental instead of what you originally paid. Tax rules get really complicated if you turn your primary residence a rental and vice versa.

If you are dealing with rentals, it is always recommended you seek expert advice and consult with a competent and experienced tax professional.

The good news here is that IRS is requesting that businesses and sole proprietors affected by this bill submit comments. We live in a democracy and this is democracy at its best because if enough people complain, there might be a solution to this burdensome requirement.

Here are the 3 ways you can submit comments to the IRS:

E-mail: Notice.Comments@irscounsel.treas.gov. Include “Notice 2010-51″ in the subject line.
Mail: Internal Revenue Service, CC:PA:LPD:PR ( Notice 2010-51), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.
Hand deliver: CC:PA:LPD:PR ( Notice 2010-51), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, DC, between 8 a.m. and 4 p.m., Monday through Friday.

The deadline to submit comments is Sept. 29, 2010.

Since most businesses might not know that there is a recourse to the new 1099 requirement, please share this post with other small business owners so that together we can avoid spending time fulfilling IRS requirements and concentrate more time in running and growing our businesses.

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Dealing with tax payers day in and day out, I see how must of them are in a financial hole since they complain about how they are indebted to everyone, from banks to friends. Even though the pundits have tricked you into believing that there are two kinds of debt, good and bad, I would argue that when you pay insane amount of money in order to get access to more money then it is all bad. Think I am crazy? Ask the person trying to pay off a credit card who can only afford to pay the minimum…

The most common reason people give me for having money in the savings account when they have pile high credit card debt is because they consider their savings account as a rainy day fund. Instead of having money in savings account paying less than 1% (these days), trying paying off your debt. The national average on credit card interest rate is currently 14.35%. (Source: CreditCards.com)

Rainy day fund is a good idea, in fact it is a great idea but you should do the math to calculate if it is worth it. Here is one example:

John Doe has $5,000 in credit card debt and $10,000 in savings. Interest rate on his credit card is 14%, or $700, but the $10,000 in savings earns just 2% annually, or $200. He could pay off the debt, saving the $700, and still earn $100 annually on the remaining $5,000 in savings.

Do you see what is happening in this example? It doesn’t make sense for you to keep more money in your savings account even though your credit card debt is lower and you can use the money from savings account to pay off the credit card. Don’t divide your money by doing mental accounting, in most cases you will not benefit.

Before you start an emergency fund, pay off your debt and then I guarantee you will save more and faster than you previously did.

A: Automobile expenses pertaining to a trade or business are deductible under the tax code as ordinary and necessary business expenses.

Actual car expenses include:

- Gasoline
- Oil
- Tires
- Repairs
- Insurance
- Depreciation
- Licenses
- Lease Payments
- Registration Fees
- Garage Rent
- Parking Fees
- Tolls

You can not use both standard mileage rate and actual car expenses at the same time. A fine or a penalty paid to a government for the violation of any law is not a deductible business expense.

Fore more information please refer to IRS Publication 463

Sacramento – The Franchise Tax Board (FTB) announced today that it has received applications claiming 80 percent of the State’s First-Time Buyer Credit.

“The time to utilize this credit is definitely running out,” said State Controller and FTB Chair John Chiang. “Any taxpayers interested in this program should work with their mortgage professional to apply as soon as possible.”

FTB will announce the cut-off date on its website giving at least 24 hours notice for applicants to fax their documentation. The credit will be allocated on a first-come, first-served basis using the date and time stamp on the fax. But, submission before the cutoff does not guarantee a credit; FTB will stop allocating credits once the $100 million is exhausted.

The First-Time Buyer Credit is expected to assist roughly 17,500 qualified buyers who purchase a qualified principal residence. A first-time buyer is someone who did not own a principal residence for the preceding three years. The home must be purchased (close escrow) on or after May 1, 2010. The buyer must reside in the home for at least two years immediately following the purchase date. This credit is equal to the lesser of five percent of the purchase price or $10,000.

To apply, an FTB Form 3549-A, Application for New Home / First-Time Buyer Credit, must be completed by the buyer and faxed, along with the final settlement statement, to FTB at 916.855.5577 within two weeks (14 calendar days) after the close of escrow.

California homebuyers still have time to qualify for the state’s other $100 million home tax credit for the purchase of a new home. The New Home Credit is available for taxpayers who purchase (close escrow) a new home after May 1, 2010, and before August 1, 2011, as long as they enter into an enforceable contract executed before January 1, 2011. The seller must certify that the home has never been previously occupied.

For more information, go to ftb.ca.gov and select Tax Credits for New Home Purchase / First-Time Buyer, or search for “2010 Home Credit.”