Today TaxMama wants you to look at your finances to see if you need to take action this month.
It’s time to review your IRA
Aside from all the brouhaha about converting your IRA account to a Roth IRA, there may be legitimate reasons to start drawing money from your IRA.
1) If you’ve reached age 70 ½, you must start your mandatory minimum distributions. http://www.irs.gov/retirement/article/0,,id=96989,00.html There are penalties if you do not start on time.
2) You have very high itemized deductions and will be paying no income taxes anyway. You can absorb thousands of dollars of income without paying any taxes. This applies to seniors with high medical expenses, or who are paying $20,000 or more for assisted living.
3) You may be young, but you have built up over a million dollars. Did you know you could start drawing the money now, under the ‘fixed annuitization method’ or ‘fixed amortization method’? Sure, you’ll pay taxes, but no penalties.
Understand your health coverage
There have been several sets of legislation in the past few years that affect your health insurance coverage. Some legislation gives your employer incentives to pay for your medical coverage. Other rules give you special deductions when you have high-deductible policies and set money aside to cover your own medical expenses. Evaluate your family’s health needs through the end of December 2011. Why that far ahead? Because some of your options or decisions may involve making adjustments to your job’s flexible spending account contributions. Often, you may not adjust those contributions until the fall. In the meantime, you may be able to make changes to your own coverage – or find that you can now afford insurance, where you were not able to before. Don’t forget to take into account any COBRA benefits to which you’re entitled, if you’ve recently lost a job, or are about to be laid off.
It’s time to sit down with both your health insurance broker and your tax professional to help design the right plan for your and your business. This year, it takes a team.
And remember, you can find answers to all kinds of questions about your financial health and other tax issues, free. Where? Where else? At www.TaxMama.com.[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]
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 see Revenue Ruling 2002-62, which is on page 710 of Internal Revenue Bulletin 2002-42 at www.irs.gov/pub/irs-irbs/irb02-42.pdf.