Go to Jeff Salisbury LWGate Home Page.From: persfin-digest <owner-persfin-digest@shore.net>
Subject: persfin-digest V4 #126
Date: Mon, 16 Feb 1998 11:18:15 -0500 (EST)
Articles sorted by: [Date]
[Author]
[Subject]
persfin-digest Monday, February 16 1998 Volume 04 : Number 126
IN THIS ISSUE:
ADVERTISEMENT: MCI CONNECT FOR CC:MAIL
Sole Proprietorship Inventory Question
Life insurance question
Paying Taxes by Credit Card?
S&P Futures Trading Start Time?
Educational Expenses ??
Cost Base of Stocks?
Foriegn CDs?
Stock Split Terminology?
Historical Quotes / Calculating DJIA?
Refund of Earnest Money?
TurboTax won't run on NT 3.51
quicken deluxe question
Chase Customer Rewards Program?
Re: 30/60 day investment vehicle needed
Re: Taxes on Bonus?
Re: Tax question
Social Security Tax Limit Increasing MUCH Faster Than Inflation
Re: How To Calculate Gain/Loss on Mutual Funds in Excel?
buy your house?
Re: Roth Thoughts & Tax question
Question Concerning IRA Withdrawal for Home Purchase
Executors/befeficiaries - look out for this
how to correct error in W2
====================================================================
Neither Clearview Associates, Inc. nor Persfin-Digest is responsible for
the content of any Persfin-Digest Sponsor Ad. Posting a Sponsor Ad does
not indicate endorsement of the product or service by Clearview
Associates, Inc. or Persfin-Digest. You're on your own.
This issue is sponsored by:
Oppenheimer Software - An Official MCI Messaging Agency. Features:
MCI Fax Broadcasting Service
MCI Fax Reply Service
MCI Connect for cc:Mail
MCI AutoForward
internetMCI
Lan Access to MCI
Telephone: 800-390-9379
FAX: 800-492-6862
E-Mail: Connect-Sales@mcimail.com
Also sponsored by Wholesale Products. Why pay retail?
The new HP360LX palmtops (Windows CE 2.0 and 8MB RAM) can be ordered.
Price $550 + shipping.
Specialists in HP320LX palmtops - the hot new HP palmtop that runs
Windows CE. Pocket versions of Internet Explorer, Excel, and Word are
included. Connectivity to PC applications. It's in stock and
orderable. Price: $470 + $15.95 shipping (in USA).
Check out our ProScan wide screen TVs and satellite receivers!
Motorola 56KB MobilSURFR PC Card/Fax Modem with Cellular capability -
$189.99
Visit our PAL/NTSC/SECAM electronics site, featuring VCRs, converters,
TVs, appliances, etc., geared to the international marketplace, at:
http://www.wholesaleproducts.com/non-usa.html
Calculators:
HP 48GX: $177.00 + s&h
HP 48G: $ 90.00 + s&h
HP620LX color palmtop with Windows CE 2.0. $850 + shipping.
Visit our newly updated and expanded Web site, at:
http://www.wholesaleproducts.com
Special Orders: wholesal@shore.net
Phone: 1-617-438-8622 (24 hours)
Fax (24 hrs): 617-438-8307
For information on placing a Persfin-Digest Sponsor Advertisement, e-mail
ikrakow@shore.net
====================================================================
Ira Krakow's Mall: http://www.krakow.com
Personal Finance Web Sites: http://www.tiac.net/users/ikrakow/pagerefs.html
To post a question or an answer, send email to: persfin-digest@shore.net
The messages posted to the Persfin-Digest are opinions and are not
intended to substitute for qualified professional advice. Subscribers
should seek the services of qualifed professionals for such advice. The
publisher, Internet provider, advertisers, and Digest contributors cannot be
held responsible for any loss incurred as a result of the application of any
of the information provided here.
Copyright (c) 1995, 1996 Clearview Associates, Incorporated
REQUESTED SUBSCRIPTION FEE: $20/year. Monies will go directly to defraying
publication costs, compensating for the time and effort of the Publisher,
and enabling the Publisher to create additional useful sources of
information on the Internet. Send cash, check, or money order (U.S.
funds), payable to "Clearview Associates, Incorporated", to:
Clearview Associates, Incorporated
12 Clearview Road
Stoneham, MA 02180-1918
Contribution will be acknowledged by e-mail if you include an e-mail address.
To Subscribe: e-mail majordomo@shore.net, text: subscribe persfin-digest
To Unsubscribe: e-mail majordomo@shore.net, text: unsubscribe persfin-digest
----------------------------------------------------------------------
Date: Mon, 16 Feb 1998 10:49:11 -0500 (EST)
From: Oppenheimer Software <Connect-Sales@mcimail.com>
Subject: ADVERTISEMENT: MCI CONNECT FOR CC:MAIL
MCI Connect for cc:Mail
From cc:Mail
To the Rest of the World
A Native Mode, Router to Router Link
Global Accessability
Secure:Helps Keep Hackers Out of Your Network
Ideal for MultiOffice & Dispersed User Applications
Uses Existing cc:Mail Client-No User [re]training Needed
Supports Windows, Mac, DOS and OS2 cc:Mail (LAN and Mobile)
No Gateway Software Used-You already Have Everything You Need!
Includes:
Internet E-Mail
X.400 E-Mail (Secure, Private, Trackable e-mail)
Fax Delivery (Alternate Delivery Option Included)
Telex, Pager and Postal/Courier Hardcopy Options
Internet Vanity Domain Name Option Available
Oppenheimer Software Authorized MCI Messaging Agency
Tel:800-390-9379 E-Mail:Connect-Sales@mcimail.com
Fax:800-492-6862
------------------------------
Date: Mon, 16 Feb 1998 10:49:43 -0500 (EST)
From: miller@symbol.com (Wayne Miller)
Subject: Sole Proprietorship Inventory Question
My wife started a business in 1997 selling scissors to professional hair
stylists. She is an independent representative of the manufacturer.
She has put together a sales "kit", with many of the scissors that she offers.
The manufacturer offers a 10% discount on shears purchased for a kit.
I live in Long Island, New York, and the manufacturer is in (tax-free)
New Hampshire.
My questions are based on the scissors placed in the "kit":
1) I filed and paid the "use" tax on the scissors placed in the kit, since
these are not readily being sold to customers.
2) Can I expense the "kit" scissors? It is well below the $18,000 limit
(total cost approx. $800), but since this is her first year, she had
no sales. Does the expense limitation up to net income apply here?
(What about the sole proprietorship and my income?)
3) Or, do I have to depreciate the scissors as an asset, using the
mid-quarter tables (purchased November 3, 1997), over three years?
4) In either case, my wife wants the flexibility to sell out of her
kit and then replace the pair of scissors. Is this allowed?
Or would I have to record the sale of a depreciated asset, etc.
(report the sales tax, and receive a credit for the "use" tax paid.)
Any help would be greatly appreciated.
Thanks,
Wayne Miller
miller@symbol.com
------------------------------
Date: Mon, 16 Feb 1998 10:50:05 -0500 (EST)
From: "Phillip Jennings" <pjennings@pharm.utah.edu>
Subject: Life insurance question
I will be changing jobs in the next few months and relocating across
the country. Currently my wife (who also works full-time) and I both
have group term-life policies through our employer in an amount that
we consider adequate should one or both of us dies. We have saved
towards retirement very aggressively over the past few years and now
have over 6 figures in our 403-b and TIAA-CREF accounts.
As we will need to obtain new life insurance policies once we
relocate, I am trying to decide on the proper amount of insurance to
purchase. My question is: since our 403-b money is ours and payable
to our beneficiary on our deaths, should I consider this payment when
calculating how much life insurance I need? For example, if I have
a retirement account worth $100,000 and determine that I need
$400,000 worth of life insurance, should I only purchase a policy
worth $300,000? I am comfortable determining what type of policy,
my needs, etc., but would like to know if retirement account money
should be counted in this equation. Thanks for your response.
Phillip Jennings
Salt Lake City, UT
------------------------------
Date: Mon, 16 Feb 1998 10:51:12 -0500 (EST)
From: "Rodin, Barry H." <brodin@pica.army.mil>
Subject: Paying Taxes by Credit Card?
I heard that the new tax law allows one to pay Income Tax by charging it
to a credit card. However, the Form 1040 instructions do not mention
this. Is this allowed for 1997, 1998, or was it disallowed?
Thanks,
Barry
------------------------------
Date: Mon, 16 Feb 1998 10:50:48 -0500 (EST)
From: Steven Klein <SKLEIN@snm.org>
Subject: S&P Futures Trading Start Time?
S+P Futures ?
Does anyone know what time of day the S+P Futures starts trading? I
wake up around 7AM and have noticed that CNBC already has the S+P
futures posted on the TV screen.
sk
------------------------------
Date: Mon, 16 Feb 1998 10:51:53 -0500 (EST)
From: "Sudhakar Vemuri" <vemuris@hotmail.com>
Subject: Educational Expenses ??
Hi,
My wife's employer is reimbursing her for her graduation. Where
should I report it in our tax returns since it is not eligible
for deduction.
Thanks,
Vemuri
------------------------------
Date: Mon, 16 Feb 1998 10:53:09 -0500 (EST)
From: Avshalom Bistricer <avshalom@pipeline.com>
Subject: Cost Base of Stocks?
What is the formula to calculate the cost base of stocks?
I buy and sell odd amounts of shares many times a year.
(I may buy 3 shares one month, sell 10 the next, buy 2 the next...
etc) I also reinvest the dividends.
One trick is that I get a 10% discount on the purchase that
is reported as income to me on W2.
Thanks
------------------------------
Date: Mon, 16 Feb 1998 10:57:11 -0500 (EST)
From: Jeff Morgan <Morgajs@parsec.com>
Subject: Foriegn CDs?
Does anyone have any info about buying foreign CDs?
For instance, where can I monitor rates, can I buy
them through a discount broker? Any experiences
with foreign CDs, good or bad, that anyone would
care to share?
Ed: Congratulations on another year of maintaining the
digest, Ira. Great job, and very much appreciated.
------------------------------
Date: Mon, 16 Feb 1998 10:58:00 -0500 (EST)
From: dmak@tma-net.org
Subject: Stock Split Terminology?
A company that declares a stock split usually declares a record and
payable date. For instance, with Microsoft's upcoming split, it
announced that shareholders as of a 2/6 record date are eligible for
the split, to be paid on 2/20. I don't understand what happens to
those who buy MSFT between 2/7 and 2/19. They still get the split,
don't they?
------------------------------
Date: Mon, 16 Feb 1998 10:59:03 -0500 (EST)
From: Rick Gleason <spyneyes@ix.netcom.com>
Subject: Historical Quotes / Calculating DJIA?
I have two questions I'd like to send your way.
#1 - Where on the web can I find historical quotes for the S&P 500
Index. I'm looking specifically for it's close on April 19, 1997. I
know there are places to get historical quotes for stocks and mutual
funds, but do not know where to find the same for an index.
#2 - Can someone explain exactly the procedure in calculating the daily
Dow Jones Industrial Average? Is it the dollar value of the thirty
added up since a particular date or what?
Thanking you in advance fror your help and consideration.
- --
Rick Gleason
Federal Way, Wa.
------------------------------
Date: Mon, 16 Feb 1998 10:59:38 -0500 (EST)
From: dollymadis@megsinet.net
Subject: Refund of Earnest Money?
My mother and father-in-law signed an agreement to buy a new home on
12-12-97. They put down 5K earnest money. My father-in-law died on 12-14-97
and when I spoke with the sales rep. on that day she assured me there would
be no problem and a full refund of the money would be forthcoming. After 5
wks. of no refund I called her again and she basically said the same thing
as in our previous conversation and promised to look into it. After 2 mos.
of no refund I phoned her again and now her position is she'll refund the
money only after they sell this home to a new buyer claiming my in-laws had
requested upgrades and she needed to recover those expenses before
refunding the earnest money. This obviously is a change in her stated
position and puts my mother-in-law at the mercy of their sales staff. I
believe that both my mother and father-in-law signed the original agreement
to purchase.
Tom Gilbertson
------------------------------
Date: Mon, 16 Feb 1998 11:00:44 -0500 (EST)
From: "Anderson, Alfred I." <anderson@mayo.edu>
Subject: TurboTax won't run on NT 3.51
For what it is worth, I took a new CDROM version of TurboTax 1997 and
installed it on an NT 3.51 SP5 system. Install proceeded normally with no
errors reported.
After completing the install, I clicked on the README icon that was created in
the TurboTax 1997 folder. It launched Notepad but did not display the
READ1040.txt file in the turbotax directory (the file name was not in the
properties for the icon).
Hmm...
Then I launched TurboTax itself. Got numerous error messages. All seemed to
indicate I had a Trial Version (nope, I have the Full Final version... not the
Deluxe, but the regular one). It asked me to reinstall, which I did, no help.
Then I took the same CDROM on the Same System and booted to WIN95. Install
worked fine, so did the Readme, and so did the TurboTax software.
Went to Intuit's web page, found the question "Will TurboTax run on
WindowsNT?" with an answer "We only test on Windows 95 and Windows 3.1, no
other environments are supported".
So, moral is, TurboTax software will not run on Windows NT 3.51. (Interesting
to note that prior versions of TurboTax DID run on NT 3.51!).
Alfred
***************************************************************
* Alfred Anderson OV ID: AP00085 Internet: anderson@mayo.edu *
* Mayo Foundation (507)284-9123 Pager: 4-6014 *
***************************************************************
------------------------------
Date: Mon, 16 Feb 1998 11:03:45 -0500 (EST)
From: "Mangiero, Susan" <MangieroS@sacredheart.edu>
Subject: quicken deluxe question
I got Quicken Deluxe for xmas. I want to start using it as a way to
record activity for 1998 but also to be able to automatically reconcile
my bank statements. I can't find in the help menu or the printed mini
manual which came with the software how to start with my check register.
Should I enter all checks written - cleared and uncleared from the last
statement even if they include 1997 checks and deposits or should I just
include 1998 items (in which case, how will I be able to reconcile the
next checking account statement for mid January with the previous one in
>mid December)? Thanks.
(Editor's Comment - Just start with a beginning balance entry for your
balance at the point when you want to start recording. -IK)
------------------------------
Date: Mon, 16 Feb 1998 11:04:07 -0500 (EST)
From: John <kahuna@financier.com>
Subject: Chase Customer Rewards Program?
Chase credit cards offer a customer rewards program for travel rebates
and participating retailer rebates. Can a member of this program
comment on the pros and cons of this add on feature. Thanks
------------------------------
Date: Mon, 16 Feb 1998 11:05:09 -0500 (EST)
From: David Neal <dneal@gnuplanet.com>
Subject: Re: 30/60 day investment vehicle needed
>Subject: Short Term (30 day) interest bearer needed
As it turns out my best bet seems to be simply transferring
the balance to my broker (Schwab) and letting them 'sweep'
it into a Money Markey Fund. That yields a 7 day
return of 4.99% (5.11% compounded) (but with a hefty
.75% expense ratio) vs the 3% of my credit union.
Schwab has higher paying 'Value Advantage' funds with smaller
expense rations but they require a $25,000 or greater
minimum investment.
------------------------------
Date: Mon, 16 Feb 1998 11:05:45 -0500 (EST)
From: "George Podhiny, Jr." <georgep@chesco.com>
Subject: Re: Taxes on Bonus?
>Does anyone know if my employer is obligated to only withhold the
>"correct" amount or can they do what they like?
As for the Federal Tax, your employer can use either the flat 28% rate
without regard to the number of exemptions you are claiming on your Form
W-4, or compute your tax by adding it to your regular wages and computing
the tax on the combined amount with allowing for your exemptions. These
are the two options allowed by the IRS. Your employer is obligated to use
one or the other. You can check this out by downloading Publication 15,
Circular E, Employer's Tax Guide from the IRS Web site:
http://www.irs.ustreas.gov/prod/forms_pubs/pubs.html
As for your State Tax, you'll need to check with them for their tax
regulations. Generally employers are not given the right to withhold
whatever they want. The laws are specific about taxes on bonus payments.
George Podhiny, Jr.
Coatesville, PA
------------------------------
Date: Mon, 16 Feb 1998 11:06:14 -0500 (EST)
From: Avrum Lapin <avrum113@cyberg8t.com>
Subject: Re: Tax question
>Dear friends,
>
>My CA state tax bill is 6000$, while my employer deductions are
>7300$. I have the following scenerios depending whether I choose
>to itemize my state taxes or not.
>
>Scenerio 1: Itemize 7300$ as state taxes, instead of standard deduction
>of 6900$. I will shave 400$ from Taxable income reported.
>But, I have to add state tax refund(7300-6000=$1300) to this year's
>income.
>
>Scenerio 2: Go for standard deduction and forego 400$ at 28% tax
>break, but do not add the refund of 1300$ in this year's income.
>
>I think Scenerio 2 is more profitable than 1 since we will be taxed
>at 31% marginal rate for 1300$ next year than saving 400$ to be taxed at
>28% in this year's tax bill.
>
>I request you to review my logic and respond.
In your case it makes sense to take the standard deduction this year and
give up the extra $400 in deductions since
$400*0.28 << $1300*0.31
As an aside paying $6000 in CA taxes places you above $80K/yr ($90 if
married) (did you want everyone to know). You will find it profitable to
spend an hour or so quarterly to estimate your taxes based on Year to Date
income. You could have adjusted your withholdings to reduce the size of
the refund. If the shoe was on the other foot (you owed CA $1300) you could
expect to pay a penalty for not filing CA estimated taxes.
The CA Employment Development Department publishes an employers guide for
deductions from which you can estimate how many dependents to claim.
Avrum Lapin
Upland., CA
------------------------------
Date: Mon, 16 Feb 1998 11:06:45 -0500 (EST)
From: Paul Michael Brown <paulo@mirror.his.com>
Subject: Social Security Tax Limit Increasing MUCH Faster Than Inflation
Recently, Rich Carreiro, helpful as ever, noted that for the 1998 tax
year the 6.2 percent Social Security tax will apply to the first
$68,200 earned, or $4228. Last year, only the first $65,400 was taxed,
resulting in a levy of $4055.
This represents an increase of 4.27 percent, year-to-year.
I understand and accept the idea that Social Security taxes should be
indexed so that the money coming into the system remains the same in
real dollars. But I am not aware of *any* source that calculated the
1997 inflation rate at whopping 4.27 percent. Even if you accept the
much-maligned CPI at face value, if I recall correctly we finished
1997 with the CPI up roughly 3 percent. So payments to those who are
fortunate enough to be cashing in Social Security while the getting is
good will be increasing by roughly that amount. That leaves at least 1
percentage point of "gravy" for the trust fund and perhaps a little
more.
IMHO, it appears as if the formula used to calculate the yearly
increase in the limit for Social Security taxes has been manipulated
by the greedy geezers and their allies in Congress to cause the
equivalent of "bracket creep" for high wage workers. Every study I've
read indicates that today's high wage workers are the *least* likely
to get their money's worth from the Social Security program, so I
think it is most inequitable to have their tax burden going up every
year in real dollars.
------------------------------
Date: Mon, 16 Feb 1998 11:07:37 -0500 (EST)
From: "Dean Rackley" <rackleyd@bmts.com>
Subject: Re: How To Calculate Gain/Loss on Mutual Funds in Excel?
> From: Rich Carreiro <rlcarr@animato.pn.com>
> Subject: Re: How To Calculate Gain/Loss on Mutual Funds in Excel?
>
> >Using Excel, what formula would I use to determine the percentage increase
> >or loss of my mutual funds? I hope my old math Teacher isnăt reading
> >this...
Hi Rich,
I use the Modified Dietz Time Weighted method. This formula is the one
used by my mutual fund company
Individual ROR calculations should consider:
When the account was started
All cash flows including deposits, withdrawals and distributions
The time each cash flow occurred
The weighting of the funds in the account
The Modified Dietz time-weighted calculation satisfies all of
these considerations.
This is a time-weighted calculation that accounts
for all cash flow activity in an account (including deposits, withdrawals)
and the time that each cash flow occurred. We calculate monthly returns
using the modified-Dietz formula below. The monthly returns are then linked
together to calculate ROR over a specific time period.
Step number 1 (monthly return):
(MVE - MVB - SCi) ¸ ( MVB + SCiWi) where,
MVE = market value at end of the period
MVB = market value at beginning of the period
SCi = sum of individual cash flows
SCiWi = sum of weighted cash flows
Step number 2 (Linking):
((1+r1) x (1+r2) x (1+r3).-1) where,
r1, r2, r3. = rate for month 1, rate for month 2, rate for month 3..
Example:
John Investor has $1,000 in Fund A at the beginning of month number 1. In
the middle of the month he makes a PAC purchase of $200 and at the end of
the month his fund holding (Fund A) is valued at $1,300.
Modified-Dietz Calculation:
MVE - MVB - SCi = $1,300 - $1,000 - $200 = $100
MVB + SCiWi = $1,000 + ($200 x 15/30) = $1,000 + $100
= 9.1%
Assuming the following monthly ROR's to complete a twelve-month period:
Month number 2 = 1.2%
Month number 3 = 3.4%
Month number 4 = 1.7%
Month number 5 = 6.3%
Month number 6 = 1.5%
Month number 7 = -3.4%
Month number 8 = -1.2%
Month number 9 = 5.0%
Month number 10 = 2.3%
Month number 11 = 2.1%
Month number 12 = 0.1%
The linked 1-year return is:
((1+r1) x (1+r2) x (1+r3).-1)
= ((1+.091) x (1+.012) x (1+.034) x (1+.017) x (1+.063) x (1+.015) x
(1+(-.034)) x (1+(-.012)) x (1+.05) x (1+.023) x (1+.021) x (1+.001)-1)
=
((1.091) x (1.012) x (1.034) x (1.017) x (1.063) x (1.015) x (.966) x
(.988) x (1.05) x (1.023) x (1.021) x (1.001)-1) = 31.3%
This is easier than it first looks and very simple to set up in Excel. No
functions are required,just straight math.
I find it useful to compute a 'rolling 12 month' return instead of the
standard Jan. 1st to Dec. 31st
If you have any further questions, drop me a note.
Dean
- --
Dean Rackley
rackleyd@bmts.com
------------------------------
Date: Mon, 16 Feb 1998 11:08:34 -0500 (EST)
From: BOB FORD <BOB_FORD@compuserve.com>
Subject: buy your house?
>Subject: companies that buy homes?
>I am interested in selling my home, but would prefer not
>to do the extensive renovations it would take to make it more
>attractive to the average home buyer. I am curious about
>those ads in the paper that say "We will buy your home any
>condition. Fast cash." and similar ads. Has anyone on this list
>had any personal experience with these types of transactions?
>I would be interested in learning more about this alternative.
>Thank you.
>Linda De Muro
>Demuro.1@osu.edu
LINDA
Yes there are companies that will buy your home fast for cash. In fact I
will buy your home fast for cash.
Notice I did not say HOW MUCH CASH. Unless you are in a very big hurry
to sell your home and are ready to take a HUGE loss, you do not want to
sell it that way. Unless you have a lot of equity in your home, the cash
offer will be a lot less than your mortgage. Then you must pay off the
rest of the mortgage.
The best way to get the highest price for a home (no matter what the
condition) is to hire a good agent. Yes, it will cost you a commission but
the liability of selling your home when you are not
knowledgable about real estate is great.
There is a buyer for every home. The lower the price, the larger the pool
of buyers.
Invest in new paint and new cheap carpet. You will more than recover the
cost of doing this.
GOOD LUCK
BOB FORD
BOB_FORD@COMPUSERVE.COM
------------------------------
Date: Mon, 16 Feb 1998 11:09:32 -0500 (EST)
From: Shankar.Prasad@eng.sun.com (Shankar Prasad)
Subject: Re: Roth Thoughts & Tax question
> From: Peter & Karen Diamond <diamond@vsi.net>
> Subject: Roth Thoughts
>
> All of the Roth IRA postings got me thinking about another aspect of
> this.
>
> Most of the decisions to convert or not are based on the question of
> whether your tax rate will be higher or lower in retirement than it is now.
> But, if a sizable portion of your retirement income is coming from a Roth
> IRA, wont you be reducing your income with the tax-free withdrawals and
> therefore reducing your tax rate, negating the benefits of the Roth in
> the first place!!!
>
> Peter Diamond
You are quite right. Also, I agree that very few of the Roth discussions
take this into account. They are all focussed on "deductible-IRA-and-
put-the-tax-savings-into-taxable-account". This business about
"putting-tax-savings-into-taxable-account" is meaningful only because
of the very low limit of 2000 on the deductible/Roth IRAs. If the
limit is ignored, both deductible & Roth have the same results if the
tax brackets remain the same. Roth does have benefits in terms of
estate tax reduction and more generous withdrawals, but those are
a second-order effect.
Assuming that your current marginal rate is 28%, you must make sure that
you have enough post-retirement income to "use up" the standard (or itemized)
deduction, personal exemptions AND the 15% rate - i.e. ensure that you
have enough other taxable income so that your post-retirement bracket
is also 28%. Otherwise, you will be losing some benefits by focusing
solely on the Roth. I personally believe that 401K taxable withdrawals
will suffice for this, such that Roth withdrawals will be beneficial.
But this may not be true for everybody. However, focusing solely on a
Roth and entirely ignoring a 401K (with or without match) or deductible
IRA would be unwise.
Another point is that 401K/deductible IRAs allow you to defer state
taxes. If you retire to a different state, on withdrawal, you will
pay the new state's rates, if any. With a Roth IRA, you are prepaying
the state taxes, and hoping that any other involved states will recognize
the tax-free nature of the Roth IRA, at the time of withdrawal. There
might also be a benefit to using 401K/deductible IRA (instead of Roth)
if you are currently earning in a high-rate state (like CA, in my case)
and might retire in a lower-rate state.
> Date: Sat, 14 Feb 1998 14:10:28 -0500 (EST)
> From: "Sudhakar Vemuri" <vemuris@hotmail.com>
> Subject: Tax question
>
> Dear friends,
>
> My CA state tax bill is 6000$, while my employer deductions are
> 7300$. I have the following scenerios depending whether I choose
> to itemize my state taxes or not.
>
> Scenerio 1: Itemize 7300$ as state taxes, instead of standard deduction
> of 6900$. I will shave 400$ from Taxable income reported.
> But, I have to add state tax refund(7300-6000=$1300) to this year's
> income.
>
> Scenerio 2: Go for standard deduction and forego 400$ at 28% tax
> break, but do not add the refund of 1300$ in this year's income.
>
> I think Scenerio 2 is more profitable than 1 since we will be taxed
> at 31% marginal rate for 1300$ next year than saving 400$ to be taxed at
> 28% in this year's tax bill.
...
> Sudhakar Vemuri
Actually, both scenarios 1 & 2 will turn out to be very similar for you.
In scenario 1, you will not add the ENTIRE state refund to your 1998
Federal income. You can look at the worksheet in this year's instructions
(which applies to last year) - it is on the instructions for line 10 of 1040.
The equivalent worksheet in 1998's 1040 will only add the amount of state
refund which caused your itemized deductions to go above your standard
deduction amount. That sentence is difficult to write correctly, but in
your scenario 1, you will be forced to add only $400 to your 1998 Income.
The only effect is that you would have transferred $400 from 1997 Income
(at 28% you say), to 1998 (at 31%). Of course, you need to balance the
3% of $400 difference against the timevalue of postponing tax on $400.
You might probably want to simply go with Scenario 2. I would have
chosen Scenario 1 if the marginal rates were the SAME for 1997 & 1998.
Any other itemized deductions (you say you are in CA - if you have a
car, a part of the annual registration fee is deductible - see your
DMV bill) might increase your benefit of going with scenario 1 - but
if they are not very large, I doubt they will have any real effect.
e.g. if DMV personal-property tax is $200, then scenario 1 will wind
up transfering $600 ($400 + $200) of Income from 1997 to 1998.
This worksheet (while semi-complicated) feels pretty fair to me. It ensures
that people in your situation do not lose their benefit, and also prevents
people from prepaying a lot of state taxes and getting deduction. I avoid
this situation by simply making sure that I never get a state (or federal)
refund - I generally owe taxes (small amount - no penalties) on Apr 15.
Of course, I have never itemized either.
- --
Regards
Shankar Prasad
sprasad@eng.sun.com
------------------------------
Date: Mon, 16 Feb 1998 11:12:14 -0500 (EST)
From: balaji@juno.com (Balaji V Ramanathan)
Subject: Question Concerning IRA Withdrawal for Home Purchase
Hi,
I have a question regarding the possibility of
withdrawing upto $10000 from a Roth IRA for a first-time
home purchase, tax and penalty-free. However the
literature I read states that for this to be true, the
Roth IRA has to have been in existence at least 5
years.
In my case specifically, I converted my regular
IRA into a Roth IRA at the beginning of the year. Now,
if I make a $10000 withdrawal from this IRA for a home
purchase, would I be liable for taxes on this amount
(in addition to the taxes I would owe on the conversion
amount, which includes this $10000) just because the
Roth IRA hasn't been in existence for 5 years? In short,
I am wondering if I would end up paying taxes twice
on this $10000 if I make this withdrawal.
Thanks.
- --------------------------------------------------------------------
Balaji Ramanathan
------------------------------
Date: Mon, 16 Feb 1998 11:14:13 -0500 (EST)
From: Jeff Morgan <Morgajs@parsec.com>
Subject: Executors/befeficiaries - look out for this
As I posted not long ago, my father passed away last
October. My sister and I had, as executors, begun closing
my father's accounts. One of these accounts was a Bank
of America credit card with a zero balance.
B of A had agreed to close the account in a phone conversation
with my sister back in November. I was surprised to receive a
letter from B of A last week requesting additional information.
To close the account, they wanted a death certificate. No
problem, I can do that, it's expected. Now get this:
They also wanted my employer's name, my annual income,
my social security number, and a signed statement that
I would [quoting from the letter] "agree to assume responsibility
for the current balance as well as all future extensions of
credit on this account."
They said "If we do not receive the requested information
within 20 days from the date of this letter, we will regrettably
be unable to give further consideration to your request."
Sounds to me like they're saying they won't close the account
unless I agree to assume liability. Wrong answer, B of A.
In case anyone has received a letter like this, take heart.
You do NOT have to accept liability, you do NOT have to
provide any information regarding your income or your
social security number, and you do NOT have to assume
debts that you did not incur.
In this case, it's almost laughable, as the account has a
zero balance, but I wonder how many consumers B of A
has browbeaten and intimidated into assuming debts for
which they are not legally responsible.
When an estate is settled, the creditors stand in line with
each other, and are paid from estate assets. Once all debts
are paid, *then* the remaining inheritance is disbursed, if
there is anything left. If debts are still owed, the next of kin
cannot be held liable.
Don't let B of A or other banks intimidate you.
Thanks.
- --
Jeff Morgan - morgajs@parsec.com
A rose by any other name would be
in a different place in the dictionary.
------------------------------
Date: Mon, 16 Feb 1998 11:14:39 -0500 (EST)
From: alufml@fanniemae.com (Francois-Michel Lang)
Subject: how to correct error in W2
Last year, my wife worked part time at a small business that recently
went out of business, but not before sending her a W2 that appreciably
understates how much federal tax she had had withheld from her paychecks.
I know the W2 is wrong, because with each paycheck she received, we noted
the deductions for fed, state, and FICA, and the fed total we summed up
is << the number on the W2.
I've tried contacting the ex-business, but their phone has been disconnected,
their space is for rent, and the former owner has an unlisted phone number.
Bottom line: I don't think I can get hold of the business or its owners.
Does anyone have any suggestions about how we can not pay this tax twice?
I don't believe there's a box for "federal tax withheld but not reported
to you on a W2"!
Any help would be appreciated.
------------------------------
End of persfin-digest V4 #126
*****************************
Articles sorted by: [Date]
[Author]
[Subject]