If you are due a refund, the lingering question you probably will have is “where is that refund?!”

Checking on your income tax return’s status is actually pretty simple to do.

The IRS has created a hub called “Where’s my refund?” that directs you to a tool to check on your refund status.

To Check your Refund Status you will Need:

1. Your Social Security number
2. Your filing status (single, married filing jointly, etc.)
3. The refund amount that you determined

What will the Refund Status Site Tell me?

When you enter the above information correctly, you’ll be able to find out:

• If your return was received
• If your return was processed
• When your refund is estimated to be mailed or deposited into your bank account (if you selected the direct deposit option)

The IRS recommends that you check at least 72 hours after you efile or four weeks if you file a paper tax return.

Watch Out for Refund Status Scams

The IRS never initiates email contact with taxpayers, so beware of emails offering to check your tax return status for you. In fact, I wouldn’t necessarily trust any websites that supposedly link to an IRS refund status site (ironic, since I did just that in this post). You’d be better off just typing irs.gov in your browser and clicking ‘I’m waiting for my refund’, and then ‘where’s my refund?’.

Tax Refund Discussion:

• How long did it take for you to receive your refund?
• How did you file this year? Paper or efile?
• Did you request direct deposit or check?

Related Posts:

• Best & Cheapest Way to Efile
• How to Change your Tax Allowances
• 2012 IRS Maximum Allowed IRA Contribution

How to Check your Tax Refund Status is copyrighted by 20somethingfinance.com without consent to republish.

The “Act” actually did a number of other things as well, including extending unemployment benefits, expanding high speed wireless broadband access, and increased the 2012 budget deficit.

But… who cares about that stuff?! More money for all of us! Gimme!

This is actually an extension of the Social Security payroll tax cuts that took effect last year.

Those tax cuts lowered the employee portion of Social Security to a withholding rate of 4.2% of taxable income versus the previous 6.2% rate prior to 2011.

The reduced rate was originally in effect for all of 2011 but had been reluctantly approved by Republicans on December 23rd through the end of February by the Temporary Payroll Tax Cut Continuation Act of 2011.

(Official White House Photo by Pete Souza)

What do you Need to do to Get the Payroll Tax Cut?

Nothing. As it is a payroll tax cut, you simply receive the additional income with each paycheck. Your employer still pays the full 6.2%, however, you only pay 4.2%.

What does this Mean for the Future of Social Security?

The government claims that the lower rate will have no effect on future Social Security benefits, however, that is hard to believe. I am not sure how the accounting works, but they claim that the reduction in revenues to the Social Security will be made up by transfers from the General Fund (in other words, more debt for the U.S.).

How Much will the Payroll Tax Cut Add to your Paycheck?

The Obama administration urged voters to share their stories on what the extra $40 per paycheck would mean to them (the $40 number assumes a $50,000 income).

The actual additional amount you could realize in your paycheck will vary. If you’re curious about how much extra this will mean for you, here is a payroll tax cut calculator.

Payroll Tax Cut Extension Discussion:

• What will you do with the additional income?
• Would you rather see this money go to Social Security or are you happy it’s coming back to you?

Related Posts:

• 2012 Tax Guide
• 2012 Tax Deadline
• 2012 Tax Brackets & Standard Deductions

Social Security Payroll Tax Cuts Extended through the Rest of 2012: What will you do with your Extra 2%? is copyrighted by 20somethingfinance.com without consent to republish.

Married Filing Separately? Does it Make Sense for my Spouse and I?

Should we be filing MFS (Married Filing Separately) or MFJ (Married Filing Jointly)?  This is a tricky question to answer.

There are many reasons that people wish to file MFS. However, tax laws don’t make it easy on you.

Right from the get go, filing as married filing separately is particularly troublesome in community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin) where income must be equally split between spouses.

There are also numerous penalties associated with choosing married filing separately.

• The overall tax rate will be higher
• You cannot take several credits including: Earned Income Credit, Adoption Credit, Credit for Child and Dependent care in most cases, or any education credits or deductions.
• The Saver’s Credit and Child Tax Credit are reduced by half
• You and your spouse must either both itemize or take the standard deduction

So with all these penalties, why would someone choose to file as MFS?  Here are some reasons my clients have given:

1. I no longer live with my spouse and I don’t want to file taxes together.
2. My spouse owes back taxes, child support, or has other liens that would prevent us from receiving a refund.
3. My spouse wants to itemize and I don’t.

Let’s analyze each separately:

#1: “I no longer live with my spouse and I don’t want to file taxes together.”

In this case I advise my clients with children that they may be able to use something called the “abandoned spouse rule” to claim head of household. To qualify for head of household while married, you must have a dependent child living in the household and the spouse must not have lived at that residence any time during the last six months of the year.  Please read publication 501 for additional criteria and information about this use of HOH.

For those that don’t have children and live in a community property state, I don’t advise filing separately.  This is because income must be split equally.  How do both people claim half a W-2?  Well, the IRS tells us to do it, but doesn’t say how.  It can’t be filed electronically, so it must be a paper form, which encourages errors.  The IRS will likely not compute your tax correctly leading to a personal review.  You should probably send a letter of explanation.  Is it really worth the extra attention?

If you don’t have children and don’t live in a community property state, you are free to file separately, but you will almost certainly be taxed more.  Depending on your personal situation, it may be worth the extra tax to keep things separate.

#2: “My spouse owes back taxes, child support, or has other liens that would prevent us from receiving a refund.”

In most states, this may be a reason to file separately, but beware of all the extra rules for MFS, listed above.  Consider that by filing jointly you will almost certainly get a larger refund, and although this will be applied to the debt, you will also be able to eliminate the debt much more quickly.

In community property states, you should file together, but also file form 8379, the injured spouse form.  Since only half of the refund is allocated to each individual, you will normally get half of the expected refund.  This form may also work for non community property states, but is less likely to be accepted or may be weighted by income.

#3: “My spouse wants to itemize and I don’t.”

One of the penalties of MFS is that either both itemize or neither does.  This must be true even if the itemized deductions for one person equal zero.  However, there may be some circumstances where this is still an advantage.  There are some deductions which are income based, such as medical expenses and non reimbursed employee expenses.  If only one spouse incurred these deductions and you would otherwise not be able to claim these deductions, it makes sense to calculate your return both ways and choose the most advantageous.  Again, if you live in a community property state, dividing income equally can be problematic.

To summarize, the IRS heavily penalizes those who file separately, but there are still some rare cases where you can benefit monetarily by filing separately.  Most couples would do better to settle their differences for one day and file taxes together.

Additional Notes from Natalie:  I work as a tax preparer in a community property state.  In four years of practice, I have never had a client who benefited from choosing Married Filing Single.

This article is meant to illustrate my personal experience.  It is not tax advice.  If you have any questions, please consult the IRS publications and your personal tax advisor.

Married Filing Separately Discussion:

• Have you file married filing separately? For what reasons? What were the tax savings?
• Do you have any additional tax tips on married filing separately?

Related Posts:

• 2011 Income Tax Return Guide
• 2012 Tax Deadline
• How to Check your Tax Refund Status

Does it Make Sense to File our Taxes Married Filing Separately? is copyrighted by 20somethingfinance.com without consent to republish.

That’s right, it’s time to dig in and start thinking about completing your 2011 income tax return.

To help you get started and perhaps give you a little motivation nudge, I have put together a 2011 tax return guide that will cover some of the basics. This isn’t meant to be a comprehensive guide, rather, just a jumpstarter to get you going.

Keep in mind that I am not a tax professional, so don’t rely on me as one. Serious questions should be taken to a tax professional (or at least answered by reader, Natalie H., who I’m sure is critiquing this tax guide).

When can I Start Filing my 2011 Taxes?

You’re free to start anytime, as long as you have your W2′s, 1099′s, and any other tax related forms that you are expecting.

However, when and should are two different matters. I’ve found that there can be a number of updates or last minute changes to tax software that don’t hit until early or mid-February. On top of that, I have received 1099′s after January. So I typically wait until late Feb. or early March before filing.

When are Taxes Due?

There is another tiny quirk this year with the tax deadline date, as there was in 2011. The 2012 tax deadline (for your 2011 taxes) is Tuesday, April 17th vs. the typical April 15th due to Emancipation Day.

What exactly does the tax deadline mean? It is the day you must have your return to the IRS postmarked or submitted electronically (e-filed).

What About a Filing Extension?

If you need an extension to your 2011 tax return, you must file IRS Form 4868 by April 17, 2012. The deadline for extended tax filing is October 15, 2012 (an additional 6 months). This doesn’t mean you can simply get away with not paying your taxes for 6 months, you have to submit your estimated taxes due (if you owe) by April 17, and then submit your paperwork by October 15.

Is there Anything I Can Still do to Impact my 2011 Taxes?

It’s not too late to still have an impact on your 2011 taxes, believe it or not.

The primary impact you can still have comes from contributing to a traditional IRA, Keogh, or SEP IRA.

You will want to check out the 2011 maximum IRA contribution limits and Traditional IRA income phaseout limits for deductions to make sure you are eligible.

You can still contribute up until the tax deadline for the 2011 calendar year, which will lower your overall adjusted gross income (AGI) and potentially bring you a bigger return or cut the taxes you owe.

On top of that, if your income is low enough, you might also qualify for the 2011 Saver’s credit.

To Itemize or Not

Itemizing your deductions, versus taking the standard deduction, may prove fruitful too. If you are self-employed, have a home or mortgage, or have a lot of out-of-pocket medical expenses, you may have a good shot at saving more through itemized deductions than taking the standard deduction. Doing so might even put you into a lower 2011 tax bracket so that some of your income isn’t taxed at the higher rate.

If you did any of the following during 2011, it could impact your return:

• Made home energy efficiency improvements? You could qualify for a 2011 energy tax credit.
• Had a child this year or was guardian for at least half a year? You could claim a child tax credit.
• Had self-employment income? You can deduct business related expenses.
• Have huge out-of-pocket expenses for medical purposes? Deductible, at a certain level.
• Paid tuition? Deductible.
• Paid interest on a mortgage or property tax? They’re deductible.
• Made a 2010 Roth IRA conversion? You can still spread out your income tax liability over the 2011 and 2012 tax calendar years.

E-File your Tax Return

Efiling is the way to go. It allows you to get your return faster and the error rate is much lower than on paper returns. I’ve written about the best and cheapest ways to efile in the past. I’ve used both Turbotax and H&R Block to efile in the past, and they are equally great products. Both offer a free 1040-EZ federal e-file version. Filing state returns electronically will cost you anywhere you go, as will more complicated returns.

I Got a Huge Tax Return! Awesome, Right?

Getting a huge tax return is not something to brag about. Getting a tax return simply means that you gave the federal government an interest-free loan over the previous year.

If you keep getting huge returns, you may need to make some changes to your withholding tax allowances (you do this through your payroll department at work). Even though they might seem cool, huge tax returns are interest free loans to the government that erode in value due to inflation, sorry to say.

A better goal would be to have a slight amount due back to the government, without having to pay a penalty. That way, the government has given YOU the interest-free loan.

How to See your Tax Refund Status

If, after submitting your return and finding out you’re going to be getting a refund, you’d like to check on your tax refund status, do it on this IRS site.

Keep in mind that the IRS never will send you an email with this option, so go to www.irs.gov and go direct to the site. Then click ‘where’s my refund’.

Reader Tax Tips

A few weeks ago I gave away 5 copies of H&R Block to readers, who offered their tax tips as part of the contest. Here are some of my favorite reader tips:

From Crystal:

“My tax tip: Fully review your return prior to signing. Many of us are tempted to just sign away without reading and reviewing what our tax preparer has done because we “trust” them. In the event you are audited (like a family member of mine was) you can’t tell the IRS “I didn’t know my tax preparer put that”.”

From Bob:

“My favorite tip, which may be obvious to some, is that your spouse may NOT be claimed as a dependent. Per the IRS “On a joint return, you may claim one exemption for yourself and one for your spouse. If you’re filing a separate return, you may claim the exemption for your spouse only if they had no gross income, are not filing a joint return, and were not the dependent of another taxpayer.””

From Mike:

“Pay your January mortgage bill, and student loans in December so you can deduct the additional interest when you file!”

From Ron:

“My favorite tax tip is to wait til near the end to file since your software will keep getting tax updates well into April.”

From Danielle:

“My tax tip: For recent grads working in a new state, make sure you read up on what type of state tax forms are appropriate for you to use based on your situation. Take the steps to obtain residency in the new state to avoid grey areas down the road.”

From Melissa:

“This is the first year that I will file “by myself”, for myself… while in college and grad school, my parents had their CPA file my taxes along with theirs. Due to that, I don’t really have a tried and true “tax tip” HOWEVER I did learn my lesson one year… ALWAYS make sure to update your address whenever you move! One year my tax refund was sent to my old address (an address in Phoenix, when I had moved to Denver months before for school) and it took me a YEAR to go through calling the IRS every month to FINALLY have the return sent to my parents address in Tucson! Absolutely crazy!”

From Natalie:

“Turn a personal loss into a business loss. For example, if you have a home underwater and need to sell consider renting for a while (6 mo to a year) before you make the final sale. Make sure to file Schedule E to report the rental income and expenses so the IRS knows you were using it as a business. Then when you sell, you can count the loss against your income. This can make a big difference if you are in a higher income tax bracket. “

Great tips, everyone!

Relax!

Taxes get a bad name, but they are not all that bad.

You can easily do them yourself in an afternoon, and if you don’t have many deductions, within an hour or two.

Put on some good music, have a glass of wine, and just relax.

2011 Tax Discussion:

• What are you dreading or looking forward to with your 2011 taxes?
• What tax tips do you have for the 2011 tax year?

2011 Income Tax Return Guide is copyrighted by 20somethingfinance.com without consent to republish.

Why isn’t April 15 the IRS tax deadline for filing, like it is most years?

April 15, 2012 falls on a Sunday. Since there is no mail service to postmark returns on Sunday, it pushes the deadline forward to Monday. However, that Monday is Emancipation Day – an observed holiday in the District of Columbia. Emancipation Day marks the day of the year (April 16) to observe President Lincoln’s signing of the Compensated Emancipation Act – a law that freed 3,000 slaves in the District of Columbia.

D.C. holidays, by law, are treated the same as federal holidays in how they impact tax deadlines, and the tax filing deadline cannot be a holiday. If you remember, Emancipation Day also extended the 2011 tax deadline as well – to the following Monday.

As a result, the 2012 tax deadline falls on Tuesday, April 17, 2012.

When is the Tax Filing Extension Date?

If you need to request a tax filing extension, you must file IRS Form 4868 by April 17, 2012. The deadline for extended tax filing is October 15, 2012.

What is the Tax Deadline?

Remember that the tax filing deadline is simply the date you must either postmark or efile by. It is not the date the IRS must receive your tax return.

The IRS begins accepting efile and freefile returns January 17, so you might as well get started!

If you are a late starter, what should you do? E-File and do your own taxes. The best Efile methods are Turbotax and H&R Block. They both have free federal efiling.

There you hate it, a bit of a history lesson, and some pertinent tax filing information.

Related Posts:

• 2012 Energy Tax Credits
• 2012 IRS Maximum 401K Contribution
• 2012 Tax Brackets

2012 Tax Deadline is copyrighted by 20somethingfinance.com without consent to republish.

If you were planning a modest home improvement update that would save you future energy costs and reduce your carbon footprint in the hopes that it would be partially funded by a home energy tax credit from the IRS, you may be disappointed in 2012.

There still are energy tax credits in 2012, but they have been significantly reduced. With the 2011 energy tax credit, you could claim a 10% tax credit on some very common money-saving home updates, which included:

• HVAC: Air conditioning (AC) and furnaces
• Windows and doors
• Roofs
• Water heaters
• Insulation
• Biomass stoves

Unfortunately, all of these tax credits disappear in 2012 – probably due to the inability to Congress to agree on any sort of spending plan. It wasn’t long ago (2009-2010) that the American Recovery and Reinvestment Act offered up fantastic 30% tax credits up to $1,500. Now that we have “recovered”, that is gone.

30% Energy Tax Credits in 2012

What you are left with for energy tax credits in 2012 are fairly generous 30% tax credits on huge energy installation projects that are geared towards environmental die-hards:

• geothermal heat pumps (no upper limit, both principal residences & second homes apply)
• solar energy systems (no upper limit, both principal residences & second homes apply)
• small wind turbines (no upper limit, both principal residences & second homes apply)
• fuel cells (up to $500 per .5 kW of power capacity. Principal residences only)

For more info, check out the Energy Star Energy Tax Credit site.

Related Posts:

• 2012 Tax Rate Brackets
• The Child Tax Credit
• 2012 IRS 401K Contribution Limits

2012 Energy Tax Credits Reduced is copyrighted by 20somethingfinance.com without consent to republish.

One of the benefits of inflation (yes, its a silver lining) is that it can lower your tax liability. In the fall, the IRS announced inflation-adjusted tax bracket (aka tax tables) changes, and there was roughly a 3% increase in each bracket.

What are Tax Brackets or Tax Tables?

Tax brackets represent the income tax rate you owe for that portion of your income that falls into that bracket. In other words, only income that falls into that bracket is taxed at that rate. As an example with the 2011 tax brackets, if you are married and filing jointly, your tax rate on your first $17,000 of income is only 10%, income between $17,000 and $69,000 is taxed at 15%, and so on.

Many wrongly assume that if your total income peaks at the 28% tax bracket, for example, all of your income is taxed at that rate. Not true. Before we get to the 2012 tax bracket changes, here are some things to consider.

2012 Tax Planning

What this information can do is help you calculate how much of your income may fall into a higher bracket in the table and look for ways throughout the year to potentially bring it down through retirement contributions and other means.

Here are some examples of things you can do to lower your taxable income:

• Donate to a 501(c)(3).
• Make a 401K contribution.
• Get a home energy tax credit.
• Contribute to a traditional IRA. (Note, you can still do this for 2011 until the 2011 tax deadline in April.)
• Claim the child tax credit if you have a new child or dependent.

This may also be a good time to revisit what your overall adjusted gross income might be this year and adjust your tax allowances so that you don’t end up getting penalized for owing too much in taxes or getting too big of a refund (lending your money to the government, interest-free).

2012 Standard Deductions

Standard tax deductions will also lower your taxable income, if you don’t decide to itemize taxes. The 2012 standard deductions have also increased:

• $5,950 for single filers & married filing separately (up from $5,800)
• $11,900 for married filers (up from $11,600)
• $8,700 for head of household (up from $8,500)
• $950 for dependents (same as 2011)

And now, on to the tax bracket changes.

2012 Tax Brackets

2012 Tax Brackets for Singles:

10% – $0-$8,700 (up from $8,500)
15% – $8,700-$35,350 (up from $8,500-34,500)
25% – $35,350-$85,650 (up from $34,500-$83,600)
28% – $85,650-$178,650 (up from $83,600-$174,400)
33% – $178,650-$388,350 (up from $174,400-$379,150)
35% – $388,350+ (up from $379,150+)

2012 Tax Brackets for Married Filing Jointly:

10% – $0-$17,400 (up from $0-$17,000)
15% – $17,400-$70,700 (up from $17,000-$69,000)
25% – $70,700-$142,700 (up from $69,000-$139,350)
28% – $142,700-$217,450 (up from $139,350-$212,300)
33% – $217,450-$388,350 (up from $212,300-$379,150)
35% – $388,350+ (up from $379,150+)

2012 Tax Brackets for Married Filing Separately:

10% – $0-$8,700 (up from $0-$8,500)
15% – $8,700-$35,350 (up from $8,500-$34,500)
25% – $35,350-$71,350 (up from $34,500-$69,675)
28% – $71,350-$108,725 (up from $69,675-$106,500)
33% – $108,725-$194,175 (up from $106,500-$189,575)
35% – $194,175+ (up from $189,575+)

2012 Tax Brackets for Head Of Household:

10% – $0-$12,400 (up from $0-$12,150)
15% – $12,400-$47,350 (up from $12,150-$46,250)
25% – $47,350-$122,300 (up from $46,250-$119,400)
28% – $122,300-$198,050 (up from $119,400-$193,350)
33% – $198,050-$388,350 (up from $193,350-$379,150)
35% – $388,350+ (up from $379,150+)

Tax Bracket Discussion:

• Which tax bracket will you top out in for 2011?
• What do you think about the 2012 tax rate changes?

2012 Tax Brackets & Standard Deductions Changes is copyrighted by 20somethingfinance.com without consent to republish.

The Saver’s Credit (officially dubbed the ‘retirement savings contribution credit‘) is a lesser known, highly advantageous tax credit that the IRS makes available to low and moderate income taxpayers who make retirement contributions to an IRA, 401K, or any other government recognized retirement account.

It’s worth taking a serious look at as it is an actual tax credit, not merely a deduction. If  you’re not sure of the distinction – a deduction simply subtracts the value from your taxable income and you pay taxes on the remaining taxable income. A credit actually gives you the entire dollar value back or subtracts the value from the taxes you owe – making it far superior to a deduction. In the case of the Saver’s Credit, it is non-refundable, meaning it can only subtract from taxes you owe.

As we’re nearing the end of a calendar year, we’re at an important crossroads of still being able to take advantage of the Saver’s Credit in 2011 and start thinking ahead to 2012.

To qualify for the Saver’s Credit in 2011:

The AGI (adjusted gross income) limit for the saver’s credit is:

• $56,500 for married couples filing jointly
• $42,375 for heads of household
• $28,250 for married individuals filing separately and for singles

To quality for the Saver’s Credit in 2012:

The AGI (adjusted gross income) limit for the saver’s credit is:

• $57,500 for married couples filing jointly
• $43,125 for heads of household
• $28,750 for married individuals filing separately and for singles

How much is the Saver’s Credit?

The short answer is that it depends on your income level and your contribution amount. It will take a bit of effort to determine how much of a credit you will receive, but don’t let that deter you – it’s free money!

The absolute most you could receive in a given year is $1,000 on a retirement contribution of $2,000. In order to figure out what kind of credit you are eligible to receive, you will have to fill out IRS form 8880 (PDF).

The 2011 and 2012 versions of this form have not yet been released, and it will change, so check back for the 2011 version, which will automatically update when released.

Once you figure out the amount of the credit from form 8880, add it to Form 1040 (PDF), or on Form 1040A (PDF)

Is anyone note eligible for the Credit?

Yes. If you are a full-time student for 5 months out of the calendar year, you are not eligible for the credit. Sorry students!

Also, if your income is above the aforementioned limits, you are ineligible.

Saver’s Credit Discussion:

• Have you ever claimed the Retirement Savings Contribution Credit?
• Will you claim the credit in 2011?

Related Posts:

• 2012 IRS 401K Maximum Contribution Limits
• 2011 IRS 401K Maximum Contribution Limits
• 2011 Maximum IRA Contributions
• 2012 Maximum IRA Contributions & Income Limits

Will you Qualify for the Saver’s Tax Credit in 2011 or 2012? is copyrighted by 20somethingfinance.com without consent to republish.

On the same day as the 401K announcement, the IRS also announced that the 2012 IRA contribution maximums and income limits.

The maximum IRA contribution did not increase, but the income limits did for both the Traditional IRA and Roth IRA. Here are the details…

2012 Maximum IRA Contribution

The 2012 IRA contribution maximums did not see a similar increase as 401K and other employer sponsored retirement plans, unfortunately.

They will remain the same as the 2010 and 2011 IRA maximum contribution limit at $5,000 for the 2012 tax year.

That’s three years in a row with no changes. I’d be really disappointed if there were no changes for 2013.

The 2012 Maximum IRA Catch-up Contribution

For those age 50 and over, the 2012 IRA catch-up contribution is still the same as 2010 and 2011 at an additional $1,000 over $5,000 ($6,000 total).

You begin to be eligible for the catch-up contribution if you turn 50 during any day in the calendar year.

Roth IRA Income Limits in 2012

IRA’s provide a great way to limit your tax liability in the present (Traditional IRA) and in the future (Roth IRA). There are, however, contribution phaseout limits based on your income that can limit how much you can contribute. The good news is that those limits (tied to inflation) will increase in 2012.

2012 Traditional IRA Income Limits

Traditional IRA income limits vary slightly from Roth IRA’s in that they are tied to whether or not you your employer sponsors a retirement plan for you.

If you do have a retirement plan with your employer:

• Single or head of household: If your MAGI is $58,000 (up from $56,000) or less, you can take a full deduction. If more than $58,000, but less than $68,000 (up from $66,000) – you get a partial deduction. If over $68,000, you cannot take a deduction.
• Married filing jointly or qualifying widow(er): If your MAGI is $92,000 (up from $90,000) or less, you can take a full deduction. If more than $92,000, but less than $112,000 (up from $110,000) – you get a partial deduction. If over $112,000, no deduction.
• Married filing separately: If your MAGI is less than $10,000, you can take a partial deduction. If $10,000 or more, no deduction.

If you DO NOT have a retirement plan through an employer:

• Single, head of household, or qualifying widow(er): Any MAGI permits a full deduction.
• Married filing jointly or separately with a spouse who is not covered by a plan at work: Any MAGI permits a full deduction.
• Married filing jointly with a spouse who is covered by a plan at work: If your MAGI is $169,000 or less, you can take a full deduction. If more than $173,000 (up from $169,000), but less than $183,000 (up from $179,000), you can take a partial deduction. If $183,000 or more, no deduction at all.
• Married filing separately with a spouse who is covered by a plan at work: If your MAGI is less than $10,000, you can claim a partial deduction. If $10,000 or more, no deduction.

If you have not yet started a Roth or Traditional IRA, I house both of mine at TradeKing because there are no account maintenance or inactivity fees, trades are only $4.95, and their customer service is great.

Happy contributing!

2012 Traditional & Roth IRA Maximum Contribution Limits is copyrighted by 20somethingfinance.com without consent to republish.

The most publicized case has been the state of California, who expects to bring in an additional $317 million a year from internet purchase taxes.

California is actually the seventh state to try to get around a 1992 US Supreme Court ruling holding that sellers can’t be forced to collect sales taxes unless they have a physical presence in the state – with affiliate advertisers or brick/mortars being considered “physical presence”. So what has Amazon, Overstock, and other large internet retailers done to avoid collecting taxes? By cutting off relationships with all of their affiliate advertisers in those states (so they no longer have a “physical presence”).

As always, there’s two sides to every story.

Those in Favor of an Internet Sales Tax:

Those in favor of an internet sales tax in California and elsewhere argue that:

• taxing internet sales levels the playing field with brick and mortar retailers and removes an unfair competitive advantage
• it’s a good way to raise tax revenue in difficult financial times, especially when it is already required
• brick/mortar retailers in states have suffered, which has led to a loss of sales tax revenue

Those Opposed to an Internet Sales Tax:

• Amazon and other large internet retailers are strongly opposed. It would cut into their margins and possibly lower sales volume while not giving much benefits to the states
• Internet retailers argue that this legislation is pushed by brick/mortar retailers like WalMart and BestBuy
• Claim that it’s an added tax on consumers in a time when they don’t need it

As much as I personally don’t want to pay additional taxes, I think the ‘con’ side arguments are fairly weak in comparison – and I don’t like Amazon’s strategy of throwing it’s affiliates under the bus to keep avoiding consumer taxes on purchases. Many will be forced to close their business or move to another state (and eventually there’s only so many states they can move to).

Those are my thoughts – and I want to get yours too.

What’s your Take on the Internet Sales Tax?

Nobody wants to pay additional taxes – I think that’s well established. But, the real question here is more about principal than personal interests.

The two questions I have for you are:

1. Should internet retailers be able continue to not have to collect & remit state sales tax?

2. If all internet retailers were taxed would you buy less stuff online?

(take the polls and share your feedback in the comments)

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