MONEY SOLUTIONS Copyright 2015 The Valley News & Clarinda Herald-Journal February 2015
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MONEY SOLUTIONS 617 W. Sheridan Ave Shenandoah, IA 51601 712.246.3097 www.valleynewstoday.com PUBLISHER Kate Thompson EDITORIAL STAFF Tess Gruber Nelson - Managing Editor Nick Johansen - Staff Writer Jason Glenn - Sports Editor GRAPHICS DEPT Heidi Woods - Graphic Design/Production Manager Tori Hopp - Graphic/Ad Designer Anna Bruening - Graphic/Ad Designer
How to prepare for filing income taxes Tax season is here, but it’s never too late to begin preparations for filing income taxes. Some people prefer to toast the new year and then arrange appointments with their accountants, while others use the new year as an opportunity to get organized and start compiling paperwork and tax questions. Preparing for tax time at the dawn of a new year can make the process go more smoothly in the months ahead. Here are some tips on how to prepare for the upcoming tax season. * Start a documents folder. Employers, charitable organizations, banks and other financial institutions begin mailing out tax forms from the previous year in early January. Individuals should keep their eyes open for any mail that appears to be tax-related. Store these documents in a folder that can protect any sensitive information. Such folders also make information more accessible as more and more documents arrive in the mail. * Begin collecting receipts and itemizing expenses. Many expenses are tax-deductible. These can include education costs, moving expenses, home improvements, medical expenses, charitable donations and childcare costs. Store receipts and other documentation, including canceled checks, with the other tax documents. These will come in handy should an audit ever be ordered. * Create a spreadsheet of important information. It is www.edwardjones.com
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handy to have all financial information at the ready. Some accountants will lower their fees if people do some of the filing preparation work themselves. This can include creating a profit/loss statement on investments, or working up a tally of charitable donations. Make an itemized list of all pertinent information so it will be handy when tax-filing time arrives. * Decide on a filing option. Technology has made filing taxes much easier. Tax preparation software is available for those who choose to file their taxes themselves. There also are walk-in centers that will prepare tax-filing documents. Individuals also can visit a certified public accountant. Whatever method taxpayers choose, allow for ample time to gather information and get the taxes filed by the deadline. Leave some wiggle room in case one filing method doesn’t work out. * Start saving money. Although the goal is to get a refund each and every year, taxpayers sometimes owe money, which can be troublesome for men and women whose budgets are stretched thin already. Those who owed money in the past should begin saving money for tax expenses as early as possible. * Develop a good filing system. Many financial professionals will advise people to keep financial records for 7 years. Any tax documents should be kept together should they need to be referenced or if an audit is ordered. Designate a filing cabinet or a box specifically for tax documents. Tax filing season is right around the corner, and the dawn of a new year is a great time for men and women to start gathering documents and preparing their returns.
How to get a bigger refund 114 W Main St Ste B Clarinda, IA 51632 712.542.2181 www.clarindaherald.com EDITORIAL STAFF John VanNostrand - Publisher Kent Dinnebier - Editor GRAPHICS DEPT Laurie Urich - Graphic/Ad Designer ADVERTISING REPRESENTATIVES Heidi Moyer Jennifer Miller
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Income tax season is a happy time for many people. Those who anticipate a considerable refund on their taxes look forward to having extra money; some individuals even plan to finance big-ticket purchases entirely with their tax refunds. Smart money management can turn a refund check into a nice nest egg or stretch dollars to make the most of this windfall of cash. The following money-management tips can help anyone develop strong saving and spending habits that can pay dividends for years to come. Get organized When looking to make the most of your tax refund, start by organizing your financial documents and getting a grasp on your spending and saving behaviors. Examine your income-to-expenditures ratio to see where the majority of your money is going. It can be difficult to make significant changes with regard to your finances if you don’t have ready access to your financial records and a strong appreciation of how your money is being spent. Pay off high-interest loans When addressing your finances, take inventory of any high-interest loans, including credit card bills. It will save you more money in the long run to pay off this see REFUND Page 6
Clarinda Herald-Journal (2/12)
2014 tax changes under the Affordable Care Act By TESS GRUBER NELSON Staff Writer
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f you purchased health insurance at the marketplace under the Affordable Care Act, you are required to file it on your tax returns. In fact, there are 46 changes to the tax code this year as a result of the ACA. Dave Lashier, CPA with Miller, Shearer, Lashier in Shenandoah, and Tammie Carpenter, Senior Tax Advisor with H&R Block in Shenandoah, agree the changes are confusing, even for them as tax professionals. “It’s very complicated; it’s as bad as everyone said it is,” said Lashier. “We get more information literally everyday through services we subscribe to saying that this has changed, and this is how you should do the calculation, or that they’ve found another glitch.” Lashier said the ACA is, “huge entanglement for someone who doesn’t have what the government considers to be affordable healthcare.” When they passed the ACA they tied it into the income tax returns, in which Lashier said he doesn’t see the connection. Therefore, he and other tax preparers are responsible for determining who has coverage and who doesn’t. Usually this entails a letter from the insurance agent, a copy of the policy, or insurance card besides just taking the person’s word for it. “Since it’s a month to month thing, you have to prove to me that you’re covered all 12 months of the year and how much was your premium all 12 months, so I can determine whether in fact whether you had affordable coverage or not,” Lashier explained. If someone has coverage that can be proven, it’s easy, including those on Medicare and Medicaid since they are considered “ minimum essential coverage”. However, if a person doesn’t not have coverage, it becomes much more difficult for all those involved, Lashier explained. Then Lashier said the preparer has to determine what the person’s shared responsibility payment is, which is a penalty that person will
pay for not carrying health insurance. It’ll work out, in most cases, for a single person, about $250, which comes out of his refund. “That’s the first year penalty, which is very small compared to what it will be in the succeeding years. There are other cases where the person will come in, having purchased insurance through the marketplace, but it’s not affordable. This, Lashier said would entitle the person to a premium assistance credit. The person tells Lashier how much they paid each month and based upon the income, as long as they are not higher than 400 percent of the poverty level, we can determine whether the premiums were too costly in which the government will kick back some money to you because you had the fortitude to go out and get insurance. But if more credit is given to what they are entitled to, they must pay that back. Lashier added. “It’s pretty much a nightmare calculation,” said Lashier. He also doesn’t like having to police whether people have insurance or not. Carpenter added that there are also some exemptions some people may qualify for, which would also be filed with their 2014 tax return. “Some can just be taken, and some have to be applied for from the marketplace. We can help taxpayers with either one of those,” explained Carpenter. There is also a website people can go to for this information, but Carpenter said it is complicated. “So many people are seeing independent insurance agents for help with the insurance and tax professional for help with the possible consequences or lack or consequences. It is confusing even to those of us who are trained to deal with it,” Carpenter said. To see the list of Affordable Care Act Tax provision, go to http:// www.irs.gov/Affordable-Care-Act/Affordable-Care-ActTax-Provisions.
Organization and record keeping are keys to filing an accurate tax return Tax season is here. Organization and good record-keeping are keys to filing an accurate return in a timely manner. Failure to submit income and expenditure information can subject a person to an audit and additional financial repercussions. To stay organized, set aside a folder to contain any items applicable to your tax filings. Make a list of expected documents, including income summaries from work, bank interest statements, student loan information, mortgage documents, charitable donation receipts, and similar items. Check these documents off your list as you place them in the folder. If documents are missing, promptly seek them out from the appropriate sources. Once all of your the necessary documents have been compiled, make an appointment with an accountant or get to work on filing your own taxes
Money Solutions - The Valley News (2/11) * Clarinda Herald-Journal (2/12) ◆ 3
Feeling overwhelmed by How to find the right financial advisor trying to figure out your taxes? Let me help you The financial industry has changed over the last half decade, and middle class men and women looking to grow their money have no doubt experienced that change firsthand. Unlike in years past when large financial firms welcomed middle class investors with open arms, many firms now take no such approach, offering little to no incentives to their own brokers for accounts that are not in excess of half a million dollars or more. Much of this shift can be traced to heightened scrutiny of the financial industry in response to the economic downturn that began in 2008. More regulations and higher costs have made it less cost-effective for financial firms to cater to middle class investors, many of whom are in the dark about the best ways to grow their money. But even though the industry has changed, men and women can still find financial advisors who can help them plan their financial futures. · Recommendations: Arguably the best way to find a financial advisor is to seek recommendations from family and friends, ideally those in similar financial shape as you. Though larger firms may prefer to ignore middle class investors, some firms make a point of catering to this oftunderserved market. When asking friends and family for recommendations, try to determine if any of the people you speak with have their own broker or simply speak with customer representatives when issues arises. Companies that provide you with your own broker may be easier to work with and more likely to listen to your concerns than those that do not assign you your own broker. · Fees: When on the lookout for a financial advisor, inquire about the fees you would have to pay if you chose a particular
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firm. Annual fees typically hover around 1 percent, but some firms willing to take smaller investors may charge nearly double that, knowing that middle class investors have few other options at their disposal. Determine the fees a firm will charge before making your final decision. When asking about fees, ask the representative to explain the details of each fee, noting if the firm will earn a specific amount if they sell you a particular product. If they will, they may be incentivized to sell you a certain product even if that is not necessarily in your best interest. · Services: It’s also important to distinguish between the services each firm provides. Some will only sell you advice, while others offer comprehensive planning that can help you in various areas, including retirement, estate planning and tax planning. Choose the firm whose offerings best match your needs. · Approach: Many investors find it’s best to work with financial advisors whose approach to investing and financial planning matches their own. If you’re risk averse, then you likely won’t be comfortable working with a financial planner whose approach is aggressive. Likewise, if your goal is to make as much money as possible and you don’t mind taking risks, then a more conservative planner likely won’t be able to yield the types of results you’re looking for. Identify your own approach to investing and planning, and then look for a planner who shares that philosophy. Upon looking for a financial advisor, smaller investors may no longer find an industry that’s waiting to welcome them with open arms. But there are ways for middle class investors to find financial planners who are willing and capable of managing their money.
Tithes and religion weren’t always synonymous Tithes have become synonymous with religious giving, but tithing was not always connected to religion. “Tithe” comes from the Old English word “teogoa,” which means “tenth.” It evolved to refer to a percentage of an individual’s income that is paid in dues, primarily to a church. Some suggest the religious tithe concept was established in ancient Hebrew and Old Testament teachings. The Christian Church didn’t officially adopt tithing until the year 787 under Pope Adrian I. Tithing actually can be traced back even further than the beginnings of Christianity and Judaica, however. There are references to tithes as early as ancient Mesopotamian times and other eras of the Ancient Near East. A tithe may be an amount voluntarily held aside for charitable giving. It also may be a tax or levy placed on a person’s income. To keep with the ancient concept of tithing, many people tithe 10 percent of their income
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Tax season is the right season for scams these types of tax preparers face everything from penalties to even jail time for defrauding their clients. Here are a few tips when choosing a tax preparer: ¡ Check to be sure the preparer has an IRS Preparer Tax Identification Number (PTIN). Anyone with a valid 2015 PTIN is authorized to prepare federal tax returns. Tax return preparers, however, have differing levels of skills, education and expertise. An important difference in the types of practitioners is “representation rightsâ€?. You can learn more about the several different types of return preparers on IRS.gov/chooseataxpro. ¡Ask the tax preparer if they have a professional credential (enrolled agent, certified public accountant, or attoney), belong to a professional organization or attend continuing education classes. A number of tax law changes, including the Affordable Care Act provisions, can be complex. A competent tax professional needs to be upto-date in these matters. Tax return preparers are not required to have a professional credential, but make sure you understand the qualifications of the preparer you select. ¡Check on the service fees upfront. Avoid preparers who base their fee on a percentage of your refund or those who say they can get larger refunds than others can. ¡Always make sure any refund due is sent to you or deposited into your bank account. Taxpayers should not deposit their refund into a preparer’s bank account. ¡Make sure your preparer offers IRS e-file and ask that your return be submitted to the IRS electronically. Any tax professional who is paid to prepare and file more see SCAMS Page 7
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The Internal Revenue Service (IRS) today warned taxpayers to be on the lookout for unscrupulous return preparers, one of the most common “Dirty Dozen� tax scams seen during tax season. The vast majority of tax professionals provide honest high-quality service. But there are some dishonest preparers who set up shop each filing season to perpetrate refund fraud, identity theft and other scams that hurt taxpayers. That’s why unscrupulous preparers who prey on unsuspecting taxpayers with outlandish promises of overly large refunds make the Dirty Dozen list every year. “Filing a tax return can be one of the biggest financial transactions of the year, so taxpayers should choose their tax return preparers carefully,� said IRS Commissioner John Koskinen. “Most tax professionals provide top-notch service, but we see bad actors every year that steal from their clients or compromise returns in ways that can severely harm taxpayers.� Return preparers are a vital part of the U.S. tax system. About 60 percent of taxpayers use tax professionals to prepare their returns. Illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shutdown scams and prosecute the criminals behind them. Choosing Return Preparers Carefully It is important to choose carefully when hiring an individual or firm to prepare your return. Well-intentioned taxpayers can be misled by preparers who don’t understand taxes or who mislead people into taking credits or deductions they are not entitled to in order to increase their fee. Every year,
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Where can families easily cut costs? Whether they’re still recovering from the recent economic troubles or simply looking for ways to build their savings, many families are hunting for ways to cut costs. Increases in the cost of living have forced the hands of many families, some of whom may not know where to begin with regard to scaling back their expenses, while others are worried that cutting costs will negatively affect their quality of life. But there are numerous ways in which families can trim some fat from their everyday expenses without sacrificing the things they enjoy. Food According to data from the Bureau of Labor Statistics, in 1984 the average American household spent slightly less than 17 percent of its annual post-tax income on food, a figure that had dipped to 11.2 percent by 2011. But over the last century, Americans also have spent more and more on food they eat away from home. In fact, the United States, at 7 percent, and Canada, at 10 percent, spent substantially less of their family budgets on food they eat at home than many similarly developed countries, including Germany (11 percent), France (13 percent) and Italy (15 percent). So while families may be trimming their grocery bills, those efforts might be offset if they are routinely dining out for dinner. Instead of weekly meals at a favorite restaurant, families looking to cut costs can reserve such nights on the town for truly special and unique occasions. Another way to trim food costs is to write up a grocery list before visiting the supermarket. Going into the store without a list is a great way to overspend and buy things you already have at home or simply don’t need. Mobile services Data analysts at the global financial firm UBS AG found that in 2007 wireless carriers brought in $22 billion in revenue in the United States alone by selling mobile services like email and Web browsing. By 2011, that revenue had nearly tripled to $59 billion. So what happened in those four years? The popularity
of smartphones skyrocketed and so, too, did family’s monthly mobile costs. A typical family of four now budgets several hundred dollars per month just for their smartphones, a sobering reality that is cutting into family funds and stretching their budgets awfully thin. Families looking to cut costs can shop around for a new provider offering less expensive plans or cut back on their mobile usage. Instead of four smartphones, which are often accompanied by expensive data plans, for the family, cut back to two smartphones and give youngsters more traditional cellular phones that don’t allow them to surf the Internet or enage in other costly activities that are a luxurybut not a necessity. Entertainment According to a 2013 report from Leichtman Research Group, a communications research and consulting firm, the average consumer spent $83.25 per month on multichannel video service in 2013. In 2010, those same consumers spent an average of $71.24 per month, meaning the cost of multi-channel video services increased by nearly 17 percent in just three years. Industry analysts expect those increases to continue, as cable television providers continue to point to the escalating cost of programming as the driving force behind the rate hikes. But families who feel their monthly cable or satellite television service is a luxury they can no longer afford or rationalize have options. Broadband Internet connections allow families to access streaming services such as Netflix, Hulu Plus and Amazon Instant Video, and access to such services is typically available at a fraction of the cost of traditional cable or satellite television services. Certain streaming services have even begun toproduce their own original content, putting them in a better position to compete with more traditional content providers by offering more than just a lower price. Cost-of-living is on the rise, but families can find ways to trim their monthly expenses without negatively affecting their quality of life.
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type of debt as soon as possible. The earlier such debts are eradicated, the less you will ultimately pay in interest. What’s more, paying off debt helps establish a better credit record and score, which can make you eligible for lower interest rates in the future. Using a refund to eliminate debt is more beneficial than simply letting the refund sit in the bank, where it’s likely to accrue less interest each month than the interest that accrues on your credit accounts with outstanding balances. Investigate savings programs It is estimated that customers who don’t have an account at a bank or credit union spend, on average, more than $800 at checkcashing businesses each year. Opening up an account with a credit union or bank will immediately save you money on check-cashing fees. Speaking with a banking representative can also provide information about various programs that will enable you to save your tax refund and earn money on it through interest accumulation. In the National Retail Federation’s annual Tax Returns Study, 40.2 percent of respondents said they planned to stash
some of their refund in savings in 2013. While traditional savings or checking accounts may offer nominal interest rates, longer-term certificate of deposits or money market accounts may yield more interest. Talk to an investment specialist Your income tax refund may be just what you need to start investing. A 2012 study by TD Ameritrade indicated 63 percent of respondents said they plan to save or invest at least part of the money they get back on their taxes. A financial planner or stock broker can guide you through potential investments that carry the right portfolio and level of risk for your needs. If you prefer to do the work yourself, many investment companies have user-friendly websites where account holders can manage their own investments and monitor the daily performance of those investments. With the right investment, you can turn your refund into a substantial amount of money over the course of several years. Stretching tax refund dollars means making smart choices regarding money management. Rather than splurging tax returns on bigticket items, use your refund to grow your savings, begin an investment portfolio or pay down debt.
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than 10 returns generally must file the returns electronically. It’s the safest and most accurate way to file a return, whether you do it alone or pay someone to prepare and file for you. ¡Make sure the preparer will be available. Make sure you’ll be able to contact the tax preparer after you file your return – even after the April 15 due date. This may be helpful in the event questions come up about your tax return. ¡ Provide records and receipts. Good preparers will ask to see your records and receipts. They’ll ask you questions to determine your total income, deductions, tax credits and other items. Do not rely on a preparer who is willing to e-file your return using your last pay stub instead of your Form W-2. This is against IRS e-file rules. ¡Never sign a blank return. Don’t use a tax preparer that asks you to sign an incomplete or blank tax form. ¡Review your return before signing. Before you sign your tax return, review it and ask questions if something is not clear. Make sure you’re comfortable with the accuracy of the return before you sign it. ¡Ensure the preparer signs and includes their PTIN. Paid preparers must sign returns and include their PTIN as required by law. The preparer must also give you a copy of the return. ¡Report abusive tax preparers to the IRS. You can report abusive tax return preparers and suspected tax fraud to the IRS. Use Form 14157, Complaint: Tax Return Preparer. If you suspect a return preparer filed or changed the return without your consent, you should also file Form 14157-A, Return Preparer Fraud or Misconduct Affidavit. You can get these forms on IRS.gov. To find other tips about choosing a preparer, better understand the differences in credentials and qualifications, and learn how to submit a complaint regarding a tax return preparer, visit www.irs.gov/chooseataxpro.
What is an IRA and why would I need one?
An individual retirement account, or IRA, is a type of account men and women who meet certain eligibility requirements can open to save money for their retirement. Unlike a 401(k), a type of retirement account that is provided by an employer, an IRA must be opened by an individual. Another difference between a 401(k) and an IRA is that men and women can withdraw money from their IRAs before they reach retirement age to pay medical expenses without incurring the penalties that apply when 401(k) account holders prematurely withdraw money from these accounts. One similarity between 401(k) accounts and traditional IRAs concerns taxation. Account holders of both types of accounts do not pay taxes on their contributions to those accounts until they begin to withdraw money in retirement (prematurely withdrawing money from a 401(k) will incur taxes and fees). But men and women who open a Roth IRA pay their taxes up front, meaning they won’t be paying taxes down the road when theywithdraw money in retirement. Each type of IRA comes with its own set of rules and restrictions, including contribution limits and eligibility requirements based on earned income. In addition, men and women with a traditional IRA must begin to withdraw their money by the time they reach age 70.5, while those with a Roth IRA can leave their money in their accounts as long as they please.
Free File Launches; Helps taxpayers with new health care law The Internal Revenue Service and the Free File Alliance announced the launch of Free File, which makes brand-name tax software products and electronic filing available to most taxpayers for free. Free File software can help taxpayers with tax preparation, including the health care law that will affect almost everyone. People can use Free File software . Free File is available only at IRS.gov/ FreeFile, thanks to a partnership between the IRS and the Free File Alliance, a consortium of 14 leading tax software companies that make their branded products available for free. Since 2003, more than 43 million people have used Free File, saving $1.3 billion based on a conservative $30-fee estimate. “You don’t have to be an expert on taxes or the new health care law. Free File software can help walk you through the rules and help you get it right,� said John A. Koskinen, IRS Commissioner. “For 12 years, this partnership between the IRS and the Free File Alliance has
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helped taxpayers save both money and time. The real winner in this partnership has been the nation’s taxpayers.� Tim Hugo, executive director of the Free File Alliance, said, “We are proud to once again offer the industry’s most innovative and secure tax software at no cost to 70 percent of American taxpayers. Tax time can be stressful, but Free File makes step-by-step help accessible to everyone making $60,000 or less. IRS.gov/FreeFile is the one place where taxpayers can choose from a variety of industry-leading tax software options in order to prepare and e-file their federal tax returns at absolutely no cost.� If you earned $60,000 or less last year, you are eligible to choose from among 14 software products. If you earned more, you are still eligible for Free File Fillable Forms, the electronic version of IRS paper forms. More than 70 percent of all taxpayers — 100 million people — are eligible for the software products. Each of the 14 companies has its own special offers,
generally based on age, income or state residency. Taxpayers can review each company offer or they can use a “Help Me� tool that will find the software for which they are eligible. Free File offers easy-to-use products that ask questions and you supply the answers. The software will find the right forms, find the right tax credits and deductions and even do the math for you. Some companies also offer free state tax return preparation as well. Free File also can help taxpayers with the new health care requirements. Almost everyone will need to do something new when filing a tax return this year. For each month in 2014, you and everyone on your return must: Report health care coverage, or Claim an exemption from coverage or Make a shared responsibility payment with your tax return. Most people will simply have to check see FREE Page 8
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Steps can be taken to lessen bite of inheritance tax
YOUR COMMUNITY NEWS SOURCE
By STEVE JORDAN OWH News Service
THE VALLEY NEWS 712-246-3097 www.valleynewstoday.com 617 W. Sheridan, Shenandoah, IA
Taxes can eat up more than half of a large inheritance in Nebraska, but it doesn’t have to happen. “It can really become kind of a nasty tax,” said Niel Nielsen, an estate attorney with Carlson & Burnett in Omaha. Nebraska is one of 19 states levying an inheritance tax, an estate tax or both. In 2007, the Nebraska Legislature ended its estate tax, which went toward state government’s budget, and revised the inheritance tax collected by the counties. Iowa also levies an inheritance tax and not an estate tax. Besides cash, stocks and other assets owned by residents, taxes on inherited property are due in the Nebraska county where the property is located, even if the owner lives elsewhere. Nielsen and the Douglas County Attorney’s Office, which oversees inheritance tax collections, said the Nebraska inheritance tax works like this: After funeral expenses and bills are paid, taxes are due in four different
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a box to report health care coverage for the entire year. If you or anyone on your return purchased coverage from the Health Insurance Marketplace, you may be allowed to take the Premium Tax Credit. If you opted for any advance payments of the Premium Tax Credit to help with your monthly insurance premium payments, you must file a tax return, even if you were not required to file. You must reconcile your advance payments with the amount you were due. Learn more at IRS. gov/aca. Free File will be available through October 2015. Taxpayers have the option to prepare their return at any time and schedule a tax payment as late as the April 15 deadline. Taxpayers who cannot meet the April 15 tax filing deadline can
8 ◆ Money Solutions - The Valley News (2/11) * Clarinda Herald-Journal (2/12)
classes. 1. Spouses pay no inheritance tax. 2. Direct relatives such as children, grandchildren, parents and siblings pay 1 percent after the first $40,000 per person. 3. More-distant relatives such as nieces, nephews, aunts or uncles pay 13 percent after the first $15,000 per person. 4. Nonrelatives pay 18 percent after the first $10,000 per person. Iowa’s inheritance tax exempts spouses, parents, grandparents, children and stepchildren. Brothers, sisters and half-siblings pay between 5 and 10 percent, depending on the amount inherited. Other relatives and nonrelatives pay between 10 and 15 percent, depending on the amount. Federal tax laws exempt an estate’s first $5.43 million, a figure adjusted annually for inflation, and tax the rest at 40 percent, excluding amounts inherited by spouses. Aside from moving to another state, people who may face such taxes can take steps ahead of time to pay less, including: Gifts: In general, gifts up to $14,000 per year per person are exempt from
also use Free File to file a sixmonth extension. Here are some common taxrelated documents you will need to complete your tax return. Remember, you must also have documentation of any credit or deduction you are claiming as well. A copy of last year’s tax return; Valid Social Security numbers for yourself, spouse and children; All income statements, i.e. W-2 forms, from all employers; Interest/dividend statements, i.e. 1099 forms; Form 1099-G showing any state refunds; Unemployment compensation amount, if any; Form 1095-A if you purchased coverage from a Health Insurance Marketplace; Proof of health care insurance coverage for you and everyone on your return.
federal income taxes, with larger amounts counted as income. Also exempt are charitable gifts, gifts to a spouse, gifts to political organizations, tuition gifts for education and gifts for medical expenses. “There are nuances to gifting, but basically you’re trying to remove assets during your lifetime,” Nielsen said. Charities: Donations to qualified nonprofit groups are exempt from estate taxes. “You have to balance between your family beneficiaries and your charity beneficiaries,” Nielsen said. “If you’re giving it to charities, you’re taking it away from your beneficiaries, but overall you’re reducing the tax.” Family foundations: Forming and funding a charitable foundation exempts money from estate taxes, and family members can decide the use of the money within the rules for taxexempt status. In general, that means such a foundation can’t simply give money to family members. “You benefit the deceased person’s causes and give the family members some control and reduce federal and county taxes,” Nielsen said.