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August 2010


by Andrew D. Schwartz, CPA

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:

  • Tax-free growth

  • No Required Minimum Distributions starting at age 70

  • No income taxation to beneficiaries on withdrawals from inherited Roth IRAs

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:

  • Caveat for Roth Converters (May 2010)

  • Memo on Roth Conversions (January 2010)

  • Minimize Taxes On 2010 Roth Conversion With IRA Roll Out (December 2009)

  • Should You Convert To A Roth in 2010? (May 2009)

  • 2010 Version Of Our Roth IRA Conversion Quiz  (May 2009)

You can also post your questions about Roth conversions on the IRA and Roth IRA Forum which is one of the twenty forums found on the MDTAXES Message Board.

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, 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 IRSSuspicious e-Mails and Identity Theft and How to Report and Identify Phishing, E-mail Scams and Bogus IRS Web Sites.



by Andrew D. Schwartz, CPA

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 to see if the energy efficient purchases you made qualify for this tax credit.


Renewable Options


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.





Income Taxes

Saving and Investing





  • Returns on extension are no longer due 8/15th.  For 2010, you have until 10/15 to file returns put on extension
  • If you participated in the NIH LRP during 2009, you only have until 9/30/10 to submit the paperwork to get back any additional taxes owed to you by the NIH. One of the MDTAXES CPAs can help you with this paperwork
  • Consider rolling your old retirement accounts held at a previous employer into your current employer's 401(k) or 403(b) plan to consolidate your finances
  • If your income will be too high for 2010 to contribute to a Roth IRA this year, consider making a non-deductible contribution to an IRA to convert to a Roth before December 31st as addressed in our March 2007 newsletter


2009 & 2010 TAX FACTS

  • For 2009 and 2010, the standard deduction for a single individual is $5,700 and for a married couple is $11,400. A person will benefit by itemizing once allowable deductions exceed the applicable standard deduction. Itemized deductions include state and local income taxes (or sales taxes), real estate taxes, mortgage interest, charitable contributions, and unreimbursed employee business expenses.
  • For 2009 and 2010, the personal exemption is $3,650. Individuals will claim a personal deduction for themselves, their spouse, and their dependents. 
  • The maximum earnings subject to social security taxes is $106,800 for 2009 and 2010.
  • The standard mileage rate is $.50 per business mile as of January 1, 2010, down from $.55 per mile for 2009.
  • The maximum annual contribution into a 401(k) plan or a 403(b) plan is $16,500 in 2010.  And if you'll be 50 or older by December 31st, you can contribute an extra $5,500 into your 401(k) or 403(b) account that year.
  • The maximum annual contribution to your IRA is $5,000 for 2010.  And if you turn 50 by December 31st, you can contribute an extra $1,000 that year.  You have until April 15, 2011 to make your 2010 IRA contributions. 


Need Help With Your Nanny Payroll?

This Month's Topics

Roth Reminder

IRS Consumer Alert

Clock Is Ticking For $1,500 Tax Credit For Energy Efficient Improvements Made To Your Home

The FICA Refund for Medical Residents 

2009 & 2010 Tax Facts

Tax and Financial Planning Calendar for August 2010


Browse our index of previous months' newsletter topics

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In a shocking development, the IRS recently announced that they will be honoring the FICA tax refunds submitted by residency programs and individual doctors.  The catch is that only FICA taxes paid prior to 4/1/05 qualify.

For more information, go to our April 2010 Newsletter, our January 2009 Newsletter, or our February 2001 Newsletter or read through the IRS' Chief Counsel Advice Memorandum on this issue.

Let's work together to keep current on this hugely valuable tax break.  Please post whatever you read or hear regarding this FICA issue on our new Message Board we set up just for this topic.

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