1st Quarter 2011 Update
April 11, 2011 | 
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We have closed out the first quarter of the year, and Glass Jacobson’s Investment Advisory team would like to share a few updates in our 1st Quarter 2011 Update.
Read more on:
- Changes affecting small business
- Important questions to ask aging parents
- Rising interest rates: the downside of economic recovery
Questions on any of these topics or the state of your investment portfolio?
jon.dinkins@glassjacobsonIA.com
What Records Should I Keep?
April 5, 2011 | Subscribe to our RSS Feed
As you are scrambling to get all your taxes properly filed by April 18th, you may be thinking: “next year, it won’t be like this. Next year, I WILL be more organized.”
Here’s a list of the records you should keep and for how long. Keep these organized and you (and you Advisor) will be glad you did.
- Income Tax Returns and Related Items: Keep all federal and state income tax returns and supporting documents (i.e., those items confirming your income and/or deductions) for a minimum of three years after the return’s filing date. The more prudent route is to keep these returns and documents for six years. Why? The IRS can assess additional taxes within three years of its filing date, but has up to six years in which to make a tax assessment if the IRS determines that a substantial amount of income has been omitted from the return.
- Mailing Receipts: Keep with your file copy of each tax return the U.S. Postal Service receipt — i.e., the registered mail receipt —showing the date the return was mailed. If your return is filed electronically, keep a copy of the electronic filing confirmation with a printed copy of the return. In the event the return is misplaced or lost, this documentation will save you from penalties.
- Residential Property Records: Keep settlement records from all of your home purchases and sales in a safe place. This will help you determine basis for any future sale and gain determination. In addition, keep records of the amounts that you spend for home improvements with this file. These records will provide documentation of your basis in the house if and when it comes time to compute your taxable gain.
- Stock and Bond Records: Keep records of your investment (e.g., stock, mutual funds, and bonds) purchases. Besides providing you with a date for determining the type of gain — long term versus short term — these records establish your basis in the investment and help to compute the gain/loss when you sell. In addition, keep records that show a return of capital on your investments.
- Depreciation Records: For any rental real estate or depreciable business property that you own, keep records of the property’s cost, the purchase date, the method used to calculate depreciation, and a schedule of all depreciation claimed on the property in previous years. Maintain these records until you sell or dispose of the property. Once you sell the property, keep these records with the tax return on which you report the sale.
- Personal Records: Keep a permanent file of personal records — such as divorce agreements, copies of estate and gift tax returns under which you received property, etc. – - since they can provide a basis for determining your tax liability when you dispose of the property.
- Other Records: There are other situations in which you will benefit from keeping records. For example, if you have made nondeductible contributions to an IRA or Roth IRA, maintaining records of these contributions will facilitate proving your tax liability when funds are withdrawn from the IRA.
Taking an Early Distribution from your Retirement Plan? 10 Things to Know.
March 28, 2011 | Subscribe to our RSS Feed
Some taxpayers may have needed to take an early distribution from their retirement plan last year. The IRS wants individuals who took an early distribution to know that there can be a tax impact to tapping your retirement fund. Here are ten facts about early distributions.
- Payments you receive from your Individual Retirement Arrangement before you reach age 59 ½ are generally considered early or premature distributions.
- Early distributions are usually subject to an additional 10 percent tax.
- Early distributions must also be reported to the IRS.
- Distributions you rollover to another IRA or qualified retirement plan are not subject to the additional 10 percent tax. You must complete the rollover within 60 days after the day you received the distribution.
- The amount you roll over is generally taxed when the new plan makes a distribution to you or your beneficiary.
- If you made nondeductible contributions to an IRA and later take early distributions from your IRA, the portion of the distribution attributable to those nondeductible contributions is not taxed.
- If you received an early distribution from a Roth IRA, the distribution attributable to your prior contributions is not taxed.
- If you received a distribution from any other qualified retirement plan, generally the entire distribution is taxable unless you made after-tax employee contributions to the plan.
- There are several exceptions to the additional 10 percent early distribution tax, such as when the distributions are used for the purchase of a first home, for certain medical or educational expenses, or if you are disabled.
- For more information about early distributions from retirement plans, the additional 10 percent tax and all the exceptions see IRS Publication 575, Pension and Annuity Income and Publication 590, Individual Retirement Arrangements (IRAs). Both publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Questions?