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How Clean is Your Credit Report?

Good credit is like money in the bank. Without it, all of your financial dealings become a lot more difficult. When your credit score is calculated, these five factors are taken into consideration:

  1. Have you been delinquent with any of your payments lately? Credit bureaus keep a record of the last 24 months' payments made to all of your creditors.

  2. Do you already have access to a lot of credit? Potential creditors take a look at your total available credit when determining your creditworthiness.

  3. Is your credit maxed out? As a general rule, potential creditors don't like to see more than 75% of your available credit outstanding.

  4. Have you applied for a lot of credit lately? Multiple inquiries can be interpreted that you're having financial difficulties.

  5. Do you check your credit report periodically? The system isn't perfect and errors occur. Order a free credit report at www.annualcreditreport.com and make sure that the information on your credit report is accurate.


MDTAXES in the News

2000 was a busy year for us. Andrew Schwartz, CPA, editor of the MDTAXES website, was interviewed by The Boston Globe for a story on Saving for a Child's College Education, and by SmartMoney.com and Elegant Bride Magazine for stories on Basic Financial Planning for Newlyweds. Andrew was also one of the experts at Lycos' Quote.com's on-line financial university during the month of August, answering questions about personal income taxes and financial planning issues posted on their bulletin boards and in their chat rooms.


Social Security Update

No one knows for sure what the future of Social Security will be. Even though most young professionals aren't counting on receiving much of a retirement benefit from social security, here's a few of the basic rules that are currently in force:

  • To be eligible to receive a retirement benefit, you (or your spouse) must work and pay into the system for at least 10 years.

  • The benefit you receive, however, will be based on your (or your spouse's) 35 years of highest earnings.

  • If you were born after 1959, your full retirement age will be 67. You can still retire as early as age 62, but your monthly benefit will be reduced by 30%.

The social security administration's website, www.ssa.gov, is quite informative. If you have any questions about the current rules and regulations, take a look at their site.


When does $100 equal $166?

Looking to get more for your money? Your first stop should be your employer's benefit department to see what expenses you can pay with "pre-tax dollars". Keep in mind, if you're in the 28% tax bracket, you need to earn $166 to have $100 left over after paying federal, state and social security taxes.

Most employers provide their employees with a Flexible Spending Account (FSA) as one of their benefits. Through your FSA, you can pay for certain benefits, such as health and dental insurance, with pre-tax dollars.

In addition, you can generally pay for other expenses through your FSA. If you have young children, you can elect to have the first $5,000 of childcare expenses paid with pre-tax dollars. The only catch is both you and your spouse need to have earned income or be full time students, and you need to be able to report the care provider's name, address, and taxpayer identification number on your tax return.

Another expense that people pay for through their FSA is medical and dental expenses. Most plans allow you to set aside up to $2,000 per year for those expenses that aren't covered by your medical or dental insurance.

The one caveat to paying for expenses through your FSA is that you either "use it or lose it". In other words, if your expenses incurred during the year are less than the money set aside within your FSA, the excess might not be refunded to you.



Income Taxes

Saving and Investing




  • 4th quarter 2000 estimates due 1/15/01

  • Receive W-2s and 1099s by 1/31/01

  • Our clients will receive their "Tax Organizer"

  • Need to review withholding for 2001

  • Establish savings and debt reduction goals for the year

  • Try to increase monthly contributions to your 401(k) or 403(b) plans

  • Set up to have $166 per month automatically transferred from your checking account into a Roth or Traditional IRA


  • Get a jump on your tax prep and call us by 2/28/01 to set up an appointment

  • Organize your tax information

  • Try to have holiday credit card balances paid off by 2/28/01


  • To have your returns completed by 4/15, please get us your information by 3/20/01

  • Use your tax refund to pay off some debts, fund an IRA, and/or invest.




  • Personal income tax returns are due 4/15/01

  • Request for automatic extension, Form 4868, due 4/15/01

  • 1st Quarter estimates due 4/15/01

  • Due date for funding your 2000 Roth or Traditional IRA is 4/15/01

  • Due date for self-employed individuals to fund their retirement plans is 4/15/01

  • Self-employed individuals who need additional time to fund a retirement plan should file a Form 4868 with the IRS


  • Good time to make semi-annual donation of clothing and household items to charitable organizations


  • 2nd quarter estimates due 6/15/01

  • Income tax returns for Ex-Patriots due 6/15/01

  • Determine if you are on track to meet the savings and debt reduction goals you set back in January



  • If you changed jobs, give us a call to discuss filling out new W-4 Forms

  • Send us the requested information for us to work through your 2001 income tax projection

  • Update your monthly cash flow budget

  • If your Keogh accounts are worth more than $100,000, Form 5500-EZ due by 7/31/01



  • Returns on extension are due 8/15/01

  • Requests for 2nd extension, Form 2688, due 8/15/01

  • Self-employed individuals who went on extension need to fund retirement plans by 8/15/01 or should file Form 2688



  • 3rd qtr estimates due 9/15/01

  • SIMPLE/IRAs need to be set up by 10/1

  • Good time to meet with insurance specialist to review your life & disability insurance



  • Returns on second extension due 10/15/01

  • Someone making $100,000 per year will go over the social security max of $80,400 this month

  • Update your net worth statement using 9/30 information




  • Good time to make semi-annual donation of clothing and household items to charitable organizations

  • Need to make applicable elections in connection with employer's flexible spending account

  • Contact MDTAXES CPA to discuss any year end tax planning questions or strategies

  • Determine whether you should convert your IRAs to a Roth IRA



  • 4th quarter state estimates should be paid by 12/31 for people who itemize their deductions

  • Keogh plans must be established by 12/31

  • Education IRAs must be funded by 12/31

  • Last chance to maximize annual contribution to your 401(k) or 403(b) plan.

2000 & 2001 TAX FACTS

  • For 2000, the standard deduction for a single individual is $4,400 and for a married couple is $7,350. A person will benefit by itemizing once allowable deductions exceed the applicable standard deduction. Itemized deductions include state and local income taxes, real estate taxes, mortgage interest, charitable contributions, and unreimbursed employee business expenses.

  • For 2000, the personal exemption is $2,800. Individuals will claim a personal deduction for themselves, their spouse, and their dependents.
  • The maximum earnings subject to social security taxes has been increased to $80,400 in 2001 from $76,200 in 2000.
  • For 2000, the standard mileage rate is $.325 per mile. Effective 1/1/2001, the standard mileage rate has been increased to $.345 per mile.
  • The maximum annual contribution to a 401(k) plan or a 403(b) plan remains at $10,500 for 2001.

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