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MONTHLY TAX NEWSLETTERAugust 2010
As of January 1, 2010, taxpayers with incomes exceeding $100,000 finally have the opportunity to convert their traditional IRAs and other qualified retirement accounts into a Roth IRA. Plus, people who convert during 2010 can elect to report the income from the conversion over the following two tax years.
What makes the decision to convert so appealing are some of the unique benefits available to Roth IRAs, including:
We have addressed various aspects regarding Roth Conversions in many of our newsletters during the past fifteen months. To find out more about whether this strategy might make sense to you, please check out the following articles:
The decision to convert existing retirement accounts to a Roth IRA carries tax ramifications that not only affect you now and down the road, but also impact your beneficiaries who someday stand to inherit your retirement accounts. If you have existing IRAs (traditional IRAs, rollover IRAs, SEP-IRAs, SIMPLE IRAs) and/or 401(k) or 403(b) accounts held with a former employer (or a current employer that allows in-service distributions), and are considering converting some or all of those assets to a Roth IRA, please contact your tax preparer or one of the MDTAXES CPAs so they can help you work through a detailed analysis prior to your making a final decision.
The IRS wants to remind you that if you receive an e-mail from a person or organization claiming to represent the IRS, then it's definitely a scam. Here is what the IRS says about these types of e-mails:
The IRS does not send taxpayers unsolicited e-mails about their tax accounts, tax situations or personal tax issues. If you receive such an e-mail, most likely it's a scam.
IRS impersonation schemes flourish throughout the year. These schemes may take place via phone, fax, Internet sites, social networking sites and particularly e-mail.
Many impersonations are identity theft scams that try to trick victims into revealing personal and financial information that can be used to access their financial accounts. Some e-mail scams contain attachments or links that, when clicked, download malicious code (virus) that infects your computer or direct you to a bogus form or site posing as a genuine IRS form or Web site.
Some impersonations may be commercial Internet sites that consumers unknowingly visit, thinking they're accessing the genuine IRS Web site, IRS.gov. However, such sites have no connection to the IRS.
For more information on scams and what to do if you're subject to one, see Online Scams that Impersonate the IRS, Suspicious e-Mails and Identity Theft and How to Report and Identify Phishing, E-mail Scams and Bogus IRS Web Sites.
You only have through December 31, 2010 to purchase energy efficient improvements for your home and qualify for a lucrative tax break. The maximum credit is equal to 30% of the first $5,000 spent on high-efficiency heat pumps, air conditioners, and water heaters, or energy-efficient windows, doors, insulation materials, and certain roofs. You can also claim the credit for certain types of asphalt roofs and stoves that burn biomass fuel.
Even if you claimed the $500 tax credit a few years back for energy efficient improvements made to your home, you can still claim the full $1,500 tax credit for 2009 and 2010 as long as you make $5,000 worth of qualified energy efficient expenditures during that two year period.
Please note that the new rules did increase the standards for an energy efficient purchase to qualify for this tax credit. Check out the products listed at www.energystar.gov to see if the energy efficient purchases you made qualify for this tax credit.
Thinking about adding solar, wind, or geothermal capabilities to your home? If so, you should be aware that The American Recovery and Reinvestment Act of 2009 also improved the tax credit for purchases of solar electric property, solar water heating property, wind energy property and geothermal heat pump property. Under the prior rules, the tax credit you could claim for most of these items was capped at $2,000 per dwelling.
As of January 1, 2009, these limits no longer apply. Through 2016, you can take a tax credit equal to 30% of your expenditures for qualified solar, wind, or geothermal property. Plus, you can claim the credit even if you add this energy producing property to a home that is not your primary residence. According to IRS Notice 2009-41, "a qualifying dwelling unit is a dwelling unit that is located in the United States and is used as a residence by the taxpayer."
Get Some Green for Going Green
To claim this tax credit, make sure to complete and attach a Form 5695 to your federal income tax return. Plenty of good information about this expiring tax break can be found on the instructions of the Form 5695 which begin on page 3 of the pdf file.
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