Tax help Articles

The 10 Rules for Successful Tax-Free Income Investing

Tue, 19 Aug 2008 18:28:05 +0000

The 10 Rules for Successful Tax-Free Income Investing

by: Ulli G. Niemann

Do you sometimes question the performance of your investment portfolio? If you are like most investors you have your income producing assets thrown in together with your equity portfolio. You look at the total mix of dividend paying stocks, bonds, mutual funds and equities, and you're confused as to why they're not producing enough income or growing your portfolio value sufficiently.

I have found that part of the reason is the nearly universal propensity of investors to ignore the long-term implications of their income investment decisions while they focus on short-term effects.

Because fixed income investing simply isn't regarded as being as exciting as other stock market investing, it has often been relegated to the "ho-hum" category by writers and not as much ink has been devoted to its ins and outs as has been expended on other types of investing. I think that's a disservice to those interested in this type of investment.

Investing for income, be it taxable or tax-free, -- and, for the record, my preference for generating tax-free income for clients is the use of CEETBFs (Closed End Exchange Traded Bond Funds) as described in my free e-book "How to earn 5% - 6.5% tax-free income." -- has some common denominators, which I have broken down into 10 rules. These will help you make better decisions and, at the same time, view income oriented investments with the correct mindset, so that you don't constantly try to second guess yourself.

1. It's important to consider the performance of the Fixed Income portion of a portfolio separately from the equity portion. Why? Because the objectives are entirely different.

Equity investments are for growth, while the primary purpose of owning fixed income securities is to generate a secure cash flow-either for spending or reinvesting until it is needed. For most people, the long-term goal of an Investment program is to generate enough income to live on, without having to touch the principal.

To most effectively analyze and manage your investments, keep your equity account separate from your income generating account.

2. All fixed income securities are "interest rate sensitive." Because of this their market price will always "vary inversely" with the anticipated direction of interest rates. Interest rates on the rise, prices will fall. Interest rates thought to be headed south, investment prices will move higher.

This applies to all Bond, Preferred Stock, & REIT prices. Accept it and live with it! The variables for the movement in price are the quality rating of the issuer, the length of time until Maturity, or the Call Date.

Do remember that price changes in Fixed Income Securities are not an indicator of, and have little impact on, the ability of the issuer to pay interest. So instead of beating yourself up when interest rates start to rise, take advantage of higher yields.

3. Because of what they are, Fixed Income Securities are generally held for the long term. The factor to consider is the amount of income being received. There is no benefit in trying to predict the future direction of interest rates, and I strongly suggest you avoid that-along with constant monitoring of changes in portfolio value.

Remember, fixed income investing works in a way like your day-to-day personal finances. You pay your expenses from your income, not from your net worth.

4. Buy only fixed income instruments where the costs are transparent. In other words, many new issues sold by brokers can carry hidden costs. While commissions have to be disclosed mark-ups don't.

There are often extremely large mark ups-3% or more is not uncommon-on new issues. Buyer beware.

5. Seek out instruments with the longest duration and only those that are Investment Grade. If you're conservative, you can find many closed end funds that are insured and use no leverage, though they offer a slightly lower yield.

6. All Interest Rate Sensitive Securities follow the same rules! This means the value of everyone's bonds will be going in the same direction as yours at any given time. Don't submit to temptation. Emotions, fear, or other non-objective motives are not good reasons to switch from one Fixed Income fund to another.

Focus on diversification and avoid investments with yields that seem too good to be true. In that aspect, Fixed Income investing and Equity investing share a couple common guidelines: (1) if it seems too good to be true, it probably is, and, (2) no matter how good the hype, you can't make a silk purse out of a sow's ear.

7. Income production is the primary reason to purchase Fixed Income Securities. Once you truly understand that you will realize that the only thing you need to pay attention to on your monthly statement is the "Income Received" number. I suggest you ignore the others.

8. To become a successful Income investor, you must also understand the following points and agree with them:

* Higher interest rates are a boon to the Fixed Income Investor; they put more money in your pocket.

* Lower interest rates also offer benefit for the Fixed Income Investor; they give you the chance to add Capital Gains to the total spending money your investments generate.

* Changes in the market value of Investment Grade Fixed Income Securities should have absolutely no meaning to you 95% of the time.

9. Open Ended Income Mutual Funds will not serve your objectives. It is no secret that the fixed income variety almost never go up. As interest rates cascaded downward over the last several years, Open Ended Income Mutual Funds did not show the same degree of gains enjoyed by individual securities-while Closed End Funds did respond to these factors.

10. There are a number of reasons why it's to your benefit to primarily use Closed End Exchange Traded Funds: Low acquisition costs, complete liquidity, professional fund management and monthly predictable cash flow. Additionally, you're offered the opportunity to buy more when prices fall and to realize capital gains when interest rates are on the downturn.

Why haven't you heard about these funds from your financial professional before? Especially now when many are yielding around 6% tax-free? For the simple reason that there is no money to be made for the financial professional recommending them. While these funds may increase your monthly income, they won't do a thing for the commission hungry salesman.

If you manage your portfolio, hopefully these 10 points will assist you in more profitable investing. If you're unsure about putting an income portfolio together by yourself, find a professional who works with these types of funds and is aware of the principles I have described, and let him or her assist you in creating the income you need to enjoy a dignified retirement.

About The Author

Ulli Niemann is an investment advisor and has been writing about objective, methodical approaches to investing for over 10 years. He eluded the bear market of 2000 and has helped countless people make better investment decisions. To find out more about his approach and his FREE Newsletter, please visit: http://www.successful-investment.com.

Collecting The Levy

Tue, 19 Aug 2008 13:54:15 +0000

Collecting The Levy

by: Henry Byers

The Financial Management Service (FMS) is a bureau of the Department of the Treasury, to provide a centralized debt collection service to most federal agencies. The FMS has begun utilizing two Congressionally mandated federal debt collection programs. One is devised to collect delinquent non-tax debt by neutralizing federal payments and the other is to collect delinquent tax debt from those individuals who receive federal payments.

The Tax Payer Relief Act of 1997 authorized the IRS to collect delinquent tax debts from individuals and businesses that receive federal payments, by levying up to 15% of each payment until the debt is paid.

Before the IRS transmits an electric file to the FMS, the IRS will send each tax debtor a notice by certified mail that will include the tax bill, a statement of the intent to levy, an explanation of the debtor's rights to appeal, and an IRS phone number to inquiries and assistance. The intent to levy notice will also inform the debtor that if arrangements are made to repay the debt within thirty days of the notice, the levy will be dismissed.

To those debtors who receive Social Security benefits, a second notice will be sent as an opportunity to make payment arrangements to repay the debt and to avoid an IRS levy. As the payments are made, the FMS will send a notice to the debtor with explanation of the reduced payment, along with contacting the IRS to answer any questions regarding past debt. A debtor can make payment arrangements through the IRS at any time, whether its before a tax levy is issued or after the tax levy begins, to be released from an IRS tax levy.

Federal tax debts will be collected by FMS through The Treasury Offset Program (TOP), a program that is also used to collect non-tax debt. The TOP database, which is maintained by FMS, includes delinquent debtor information that has been submitted by federal agencies. As with the tax levy program, the IRS will supply the FMS with an electronic file containing tax debt information to be compiled in the TOP database.

FMS will match the federal payment information with the TOP database and the contact the IRS if they find any matches that would specifically identify any debtors that are recipients of Social Security benefit payments. The IRS will then send a notice of levy to the FMS to reduce matched payments continuously at a rate of 15% until the debt is paid, until other repayment arrangements are made, or until the expiration of the statutory collection period.

In February of 2002, the FMS started reducing the IRS garnishment amounts of Social Security beneficiaries who owed delinquent federal tax debts, by sending the IRS the levied amounts and sending the balance of the payments to the tax payer.

About The Author

Henry Byers, Retired IRS Manager and IRS Garnishment expert at eGarnish Group LLC ( http://www.irs-garnishment.info ) publishes other articles related to IRS Garnishment at http://www.wage-garnishment-law.info and http://www.garnishment-california.info.

Changing Jobs? Don?t let your 401(k) slip away.

Tue, 19 Aug 2008 06:07:24 +0000

Changing Jobs? Don?t let your 401(k) slip away.

by: Ken Morris

Changing Jobs? Don?t let your 401(k) slip away.

Today?s job market is more transitory than ever. And, as more and more individuals switch jobs, they begin to wonder what they should do with the money they have accumulated in their employer-sponsored retirement plans such as their 401(k) plans. The good news for 401(k) plan participants is that your retirement plan assets are very portable so you may be able to keep your existing 401(k) plan assets in a tax-deferred environment.

The trick is to resist the urge to use the monies. After tucking money away in your 401(k) for quite some time, you may be tempted to use it to treat yourself to a new car or some other indulgence. Because it could literally take years to replace your existing 401(k) funds, you should think carefully before prematurely taking money from your retirement savings.

A hasty withdrawal decision by someone under age 55 could easily wipe out a third of your 401(k) assets. If you decide you want a lump-sum withdrawal paid directly to you, the 401(k) plan trustee must withhold 20% for federal income tax and, if you do not attain age 55 prior to the end of the year in which you separate from service, the trustee must also withhold an additional 10% premature distribution penalty. So you will receive a net payout of 70 to 80% of your existing 401(k) plan account balance. After age 55, however, the premature distribution penalty is no longer imposed if your withdrawal is prompted by your separation from service with the employer sponsoring the plan.

Of course, if you choose to take a withdrawal, you may, within 60 days of the distribution, subsequently decide to deposit it into an IRA as a qualified rollover. However, for the withdrawal and re-contribution to be a tax neutral event, you would need to deposit the gross distribution amount into the IRA, which means you need to replace the withheld monies with funds from another resource such as your personal savings.

If you can resist the urge to take a withdrawal when you change jobs, you are one step closer to making a distribution decision that will preserve your hard-earned money. To be in the best position to make an informed decision, you should consider other options available for your existing 401(k) assets, such as:

? leave your assets in the 401(k) plan,

? transfer your assets to a new employer?s 401(k) or retirement plan, or

? roll your assets into an IRA.

Leaving your assets in the 401(k) plan may not be your best option. It depends on your existing 401(k) plan?s provisions. Some plans have limited investment options for employees who have separated from service and some have restrictive distribution options. However, most plans do allow employees who separate from service to roll their 401(k) assets to a new employer?s 401(k) plan, or retirement plan, or to roll to an IRA.

Transferring your existing 401(k) assets to a new employer?s plan may be an option. To do so, you must first meet the eligibility requirements of your new employer?s plan. Additionally, the trustee on the new plan must agree to accept your assets, which may be a concern, especially if your existing 401(k) assets include shares of employer stock. Information on other considerations involved in transferring your existing 401(k) assets to your new employer?s 401(k) plan is available from your new employer.

A direct transfer to an IRA avoids the mandatory withholding of the 20% for income tax and the 10% for the premature distribution penalty, if applicable. Your 401(k) plan trustee may simply transfer your plan assets electronically or may cut a check payable to your IRA. Once in your IRA, the assets continue to accumulate tax-deferred. One of the more attractive aspects to rolling your existing 401(k) into an IRA is your control feature. Not only do you have more control over your investment options; but, you will also have more control over the timing and manner of your distributions.

Your 401(k) plan account balance represents your savings; therefore, it is important to make informed distribution decisions that will preserve your hard-earned money. To learn more about the portability of your 401(k) assets, or for more information on preserving your 401(k) assets and 401(k) retirement planning strategies based on your particular situation, please contact a Financial Advisor for a complimentary consultation.

About The Author

Ken Morris

Fearing the American worker is being left in the dark, Mr. Morris, a fee based Investment Advisor Representative with Raymond James Financial Services, Inc., helps 401k participants get the most out of their retirement plan.

raymondjames.com

lindsay.brickner@raymondjames.com

Using Equity to Finance Home Repairs

Tue, 19 Aug 2008 04:12:19 +0000

Using Equity to Finance Home Repairs

by: John Mussi

A home equity loan allows you as a homeowner to get a loan by using the equity in your home as your collateral. The equity here consists of whatever funds you have invested in your property in order to own it or improve it. Since it is a debt against your own property, which you are in actual possession of, a home equity loan is a secured debt. The property can be required to be sold if you are unable to pay the money back that you have borrowed.

Home-equity loans typically have fixed rates and give you five to 15 years to repay. Home-equity lines of credit usually have variable rates and a 10-year period during which you make only interest payments, followed by a 10- or 15-year period during which you must pay off the debt.

Why Should I Consider a Home Equity Loan to Pay for Repairs?

Repairs and maintenance are part of the routine costs of owning a home. Such expenses ideally should be paid out of your current income. Some years you'll spend less, but other years you'll spend more, and it can be handy to have some cash saved up for bigger repairs. If you don't have the cash but need to make the repairs to preserve the value or safety of your home, then a home-equity loan or line of credit can be a good alternative. The interest rates on home-equity borrowing tend to be low, and your interest payments may be tax-deductible.

When you're using home equity for repairs, though, you should try to pay off the loan as quickly as possible. Unlike home improvements, repairs don't add much value to your home, so it doesn't make sense to stretch out the repayment.

Tax benefits of home equity loans

A home equity loan is also beneficial because the home equity loan rate charged is usually tax deductible, as the loan is used for its primary functions. You can check on various home equity interest rates with a home equity loan calculator and decide what the best rate is for you. This is not the case with other forms of consumer credit, like credit cards and auto loans.

Do Your Homework

Contact several lenders--and be very careful about dealing with a lender who just appears at your door, calls you, or sends you mail. Ask friends and family for recommendations of lenders. Talk with banks, savings and loans, credit unions, and other lenders. If you choose to use a mortgage broker, remember they arrange loans but most do not lend directly. Compare their offers with those of other direct lenders.

Be wary of home repair contractors that offer to arrange financing. You should still talk with other lenders to make sure you get the best deal. You may want to have the loan proceeds sent directly to you, not the contractor.

Comparison Shop

Comparing loan plans can help you get a better deal. Whether you begin your shopping by reading ads in your local newspapers, searching on the Internet, or looking in the phone book, ask lenders to explain the best loan plans they have for you. Beware of loan terms and conditions that may mean higher costs for you. Negotiate with more than one lender; don't be afraid to make lenders and brokers compete for your business by letting them know you are shopping for the best deal. Ask each lender to lower the points, fees, or interest rate. And ask each to meet--or beat--the terms of the other lenders.

You may freely reprint this article provided the following author's biography (including the live URL link) remains intact:

About The Author

John Mussi is the founder of Direct Online Loans who help homeowners find the best available loans via the www.directonlineloans.co.uk website.

Helpful Tax Tips For Federal And State Tax Returns

Tue, 19 Aug 2008 01:01:24 +0000

Helpful Tax Tips For Federal And State Tax Returns

by: Gray Rollins

Each year there are millions of Americans who prepare their own federal and state tax returns and even more individuals have their taxes professionally prepared. Whatever choice a taxpayer makes there are a number of important tax tips that everyone should know.

A W-2 or 1099MISC is needed to accurately prepare a federal or state income tax return. There is always a chance that a taxpayer may misplace these forms or for one reason or another the forms may not have reached them. For federal tax returns and most state tax returns a W-2 or a 1099MISC is required. Individuals who do not attach these items are likely to prevent their tax returns from being processed or cause a refund delay. The Internal Revenue Service (IRS) states that all taxpayer should receive their W-2 or 1099MISC forms before February 15th. Individuals who did not receive these items are encourage to contact their employer to determine why the forms have not arrived. Taxpayers who misplaced their W-2 or 1099MISC forms are encouraged to contact their employer right away to receive a copy. Taxpayers must do so because even if a wage or income form is missing a tax return is due on the traditional April 15th deadline or else late fees and penalties may be assessed.

Another one of the popular tax tips that taxpayers should know about is tax deductions. It is estimated that each year the American public loses millions of dollars from tax deductions that they were entitled to, but failed to claim. A professional tax preparer and a tax software program may prompt an individual to claim tax deductions that they qualify for. Individuals preparing their own paper taxes are more likely to miss tax deductions that they may claim. To prevent this from happening taxpayers are encouraged to research the most frequently overlooked tax deductions to determine which deductions they may qualify for.

Another one of the most common tax tips that taxpayers need to be aware of is what to do if they can?t pay the amount of taxes owed on federal or state tax returns. The biggest mistake that taxpayers make when realizing that they cannot pay the amount due on their taxes is to not file a tax return. Some people think that not filing a return will prevent a refund from being owed on time when in reality it can make the situation a lot worse. Taxpayers can file an extension deadline; however, the estimated amount of taxes owed is still due on the traditional tax deadline. The Internal Revenue Service (IRS) will impose a number of late fees and penalties on tax payments that were not received in time. Just ignoring the Internal Revenue Service (IRS) may increase the number of or the amount of penalties.

http://www.taxhelpdirectory.com/irs/irstaxlaw/

One of the most important tax tips that a taxpayer needs to keep in mind is that the Internal Revenue Service (IRS) and many state governments change or update their tax laws each year. For this is reason taxpayers are encouraged to check out the website of the Internal Revenue Service (IRS) or the website of their state tax department to determine if any of the tax law changes need to be applied to their federal or state tax returns.

These helpful tax tips are just a few of the many tax tips that can help tax preparation flow more smoothly. The above mentioned tax tips will also help to reduce the amount of money that an individual owes on federal or state taxes or even potentially increase the amount of their refund. Why pay late fees or lose money on tax deductions that you deserve? Let these and other helpful tax tips assist you this tax season.

About The Author

Gray Rollins is a featured writer for the Tax Help Directory. To learn more tax tips, visit http://www.taxhelpdirectory.com/taxtip/ and for more tax information, visit http://www.taxhelpdirectory.com/taxinformation/.

Why Buy A Hybrid Car?

Mon, 18 Aug 2008 19:23:52 +0000

Why Buy A Hybrid Car?

by: Ron King

For anyone interested in saving money at the gas pump and helping the environment, the new hybrid cars are an excellent choice. Small and fuel-efficient, hybrids are now being made by more manufacturers than ever.

Although hybrids cost more, and can be hard to find due to high demand, it still pays to choose a hybrid. Consider the following reasons to buy a hybrid next time you are in the market for a new car.

Smaller, More Efficient Engines

The hybrid's fuel efficiency is increased by its small size and the use of lightweight materials. Periodic engine shut-off is another fuel saving feature of the hybrid. When it is stopped in traffic, the hybrid's engine temporarily shuts off. The engine restarts automatically when the car is put back in gear.

Hybrids are powered by the combination of an efficient gasoline engine backed by an electric motor for acceleration. The electric motor is powered by batteries that are recharged automatically by recapturing the kinetic energy usually lost during braking, known as regenerative braking. When the car is slowing down, the electric motor runs backwards, acting as a generator to charge the battery.

With this collection of advanced fuel efficiency features, hybrids can outperform conventional cars in several arenas.

Environmental Friendliness

Another reason hybrids are more environmentally friendly than conventional gas engines is that they idle less and use fuel more efficiently. The hybrid not only gets better gas mileage, it produces less pollution than other, non-hybrid cars. Some hybrids are getting 10 to 20 miles per gallon more than a regular gas engine. They are also capable of reducing harmful emissions by 90%.

Many hybrids use aerodynamic design to reduce drag and improve fuel efficiency. Low rolling tires made of special resistant rubber reduce friction on the road. The high capacity, nickel-metal-hydride battery pack is reliable and available to power the hybrid when needed. Hybrids also use the latest in power-train technology, for integrated power management that contributes to fuel efficiency.

Popularity Enhances Styles And Choices

More makes and models are now being offered as the popularity of hybrid cars continues to escalate. Buyers can now purchase the Honda Civic and Accord, Ford Escape, and Toyota Camry in hybrids. GMC and Chevrolet are currently making 2 hybrid pick-up trucks. In the near future, Saturn, Lexus, Honda, and Chevrolet will make hybrid SUVs available to the public. Chevrolet has plans to offer its Malibu in hybrid form in 2007.

You can get a hybrid that looks like a conventional car, such as the Ford Escape. Or you can choose a hybrid that looks completely different from anything else on the road, such as the Toyota Prius. With so many hybrid cars on the market, there is a style to suit almost everyone.

Tax Incentives Available

People who buy hybrids can get significant tax breaks from the US Federal government through 2006. The amount of your tax break is determined by your tax bracket and when you file. Some states are also starting to offer hybrid car tax breaks as well. Tax breaks backed up over the long run by lower fuel costs make hybrid cars a good buy.

Fuel Efficiency Becomes A Reality

Although most people have been aware of hybrids only in recent years, the technology has actually been around for a long time. Ferdinand Porsche built the first successful hybrid car in 1899. But hybrids first began to catch on in the 1990s when Honda introduced the Insight and Toyota introduced the Prius.

It's been a long wait, but fuel-efficient transportation is finally becoming a reality with the hybrid. As more of these cars take to the road, our air will become cleaner, and our country will be less dependent on foreign sources of oil.

About The Author

Visit http://www.eco-car4u.com to learn more. Ron King is a full-time researcher, writer, and web developer, visit his website at http://www.ronxking.com.

Know How To Take Your Lumps

Mon, 18 Aug 2008 17:40:04 +0000

Know How To Take Your Lumps

by: Ken Morris

If you are about to retire or change jobs, or if your employer is terminating the company retirement plan, you may be eligible to receive a "lump sum distribution" as defined in the Internal Revenue Code. Such a distribution may be substantial and may represent the cornerstone of your retirement security. So it is important to consider your options carefully before making a decision regarding distributions.

Basically, you are faced with two main options. Should you take a direct distribution and pay your taxes now? Or should you roll your distribution over into a traditional Individual Retirement Account (IRA)?

If you decide not to roll the distribution over into a traditional IRA, you must pay tax on the distribution in the year you receive it. You will, of course, be able to invest the remainder as you please. The main benefit of paying taxes on your distribution now is that you may be eligible for special tax treatment. If you were born before 1936, you may be eligible for ten-year tax-averaging on your lump sum distribution. Or, if your distribution will include shares of your employer?s stock, a portion of your distribution may be eligible for the new lower capital gains tax treatment. If either of these situations exists, you may be able to pay a lower tax rate than usual on your distribution. If not, your distribution may be taxed at your ordinary income tax rate so you may want to consider your second option.

Your second option is to roll the distribution over into a traditional IRA. This alternative assures that assets will continue to enjoy tax-deferred growth to provide for your retirement. Under current IRS regulations, you need not begin taking distributions from your traditional IRA until you reach age 70 1/2.

Here are some facts to keep in mind when faced with the distribution decision.

? Only 60 days are permitted between the receipt of your lump sum distribution and the date of the roll over.

? All contributions (pre- and after-tax) and earnings distributed from the employer's qualified plan may be rolled over.

? Regardless of whether it is deductible, it is still possible to make an annual $4,000 (for 2006) IRA contribution, plus a $1,000 catch-up for those who have attained age 50, to a traditional or Roth IRA account.

? Contributions to the IRA may only be made in cash; but, with a rollover transaction, if non-cash assets are received as part of the distribution, they may be rolled into the IRA (e.g. employer stock or mutual fund shares).

? Distributions may be made from a traditional IRA account at any time after age 59 1/2 free of penalty.

The traditional IRA account provides you with an opportunity to continue building assets during working years through continued tax-deferred compounding. There will be no tax implications until you begin to take distributions. This continued tax-deferred growth could mean the difference between your living simply or living well during your "golden years." Of course, before you decide which strategy best meets your objectives, it is a good idea to consult with your financial and tax advisors.

About The Author

Ken Morris, a fee based Investment Advisor Representative with Raymond James Financial Services, Inc., helps 401k participants get the most out of their corporate plans.

raymondjames.com

lindsay.brickner@raymondjames.com

How IRAs work

Mon, 18 Aug 2008 14:03:45 +0000

How IRAs work

by: John Mussi

Are you taking advantage of individual retirement account (IRA) opportunities? IRAs can be frustrating because of the different forms and reports, difficult or confusing IRA rules. Successful retirement planning usually means coordinating personal savings with benefits from an employer's retirement plan and social security. However, in the last 30 years, retirement planning has changed, putting more emphasis on personal saving through retirement plans at work and through IRAs.

IRA Owner Benefits

As additional incentives to save, IRAs provide current tax benefits, such as:

Tax-deductible contributions to eligible individuals of traditional IRAs (since 1975)

Nontaxable distributions from Roth IRAs (starting in 1998) are found to be a more attractive alternative by many individuals who are ineligible for traditional IRA deductions

Income tax deferral on IRA earnings enjoyed by both traditional IRA and Roth IRA owners

Although tax benefits are important savings incentives, IRA owners also enjoy these advantages:

IRA distributions are generally available at any time (though there may be a penalty for withdrawal before age 60)

IRA investment options are nearly limitless

IRA assets are eligible for a tax-free transfer between financial organizations

Contributions and Distributions

You invest money in an IRA, up to the amounts allowable under the tax law. These investments are termed "contributions." In many instances an income tax deduction is available for the tax year for which the funds are contributed. The contributions, as well as the earnings and gains from these contributions, accumulate tax-free until you withdraw the money from the account. You therefore enjoy the ability to generate additional earnings, unreduced by taxes on these earnings, each year the funds remain within the IRA.

The withdrawals of the funds from the IRA are termed "distributions." Distributions are subject to income taxation, generally in the year in which you receive them. Remember that in most cases you received an income tax deduction when you contributed the money to the IRA.

When You Can Cash In Your IRA

Since the original purpose of the IRA is to assist you in providing for your own retirement, it is not to your advantage to withdraw funds from an IRA before age 60. This disincentive takes the form of a 10 % tax "penalty" of the distributions received by you prior to age 60, unless certain exceptions apply. Given the complexity of this issue alone, professional advice should be obtained whenever significant amounts of distributions are needed. The fact is that many times the penalty can be avoided with proper planning. Obviously these distributions are subject to income taxation upon receipt. Once you are age 60 this "Premature Distribution" penalty is no longer applicable.

On the flip side of the government not wanting you to withdraw your money at too young an age, it also has rules to prevent you from not withdrawing the money soon enough. This is done in order that the government can tax it. You usually need to begin taking money from your IRA no later than April 1 of the calendar year following the date you attained age 70 1/2. The rules established by the government regarding these Required Minimum Distributions, their timing, the amounts, the recalculations, and the effect various beneficiary designations have on them, are among the most complex of the Internal Revenue Code. The penalty is 50 % of the shortfall between what you should have withdrawn and the amounts you actually withdrew by the proper date. This punitive penalty is matched only by the civil fraud penalty in severity. The necessary calculations are therefore not something that most individuals should attempt on their own.

You may freely reprint this article provided the following author's biography (including the live URL link) remains intact:

About The Author

John Mussi is the founder of Direct Online Loans who help homeowners find the best available loans via the www.directonlineloans.co.uk website.

Avoiding Credit Repair Scams

Mon, 18 Aug 2008 10:22:09 +0000

Avoiding Credit Repair Scams

by: John Mussi

Credit repair can take time? especially if you have poor credit and don't really have the time that you need to repair it. Unfortunately, many criminals and con artists know that credit repair is much needed and often time consuming and see this as an opportunity to make dishonest money by offering people what they want but that the con artist isn't able to offer. Even more unfortunate is the fact that large amounts of money are scammed in this manner each year, almost always from the people who are most severely in debt and can afford it the least.

If you worry that you might fall victim to one of these credit repair scams, then the information below might help to give you a better idea of what to look out for so that you don't end up losing money that you can't afford to lose.

The Appeal of Something for Nothing

The reason that credit repair scams are so numerous is that people love the idea of being able to get something that they want with minimal investment of either time or money on their part. Desperation can add to this, especially in the case of someone who is severely in debt and it seems as though the only option that they have left is bankruptcy.

Credit repair scammers generally offer a ?quick fix? to an individual's credit, and the price usually isn't that bad? unfortunately, the service (if any) that they provide is illegal and by the time that a consumer finds that part out the scammer is gone.

Avoiding ?Instant? Credit Repair

One of the biggest scams of this kind is that of ?instant? credit repair, in which the scammer replaces an individual's tax ID number with a new one in order for the individual to be able to establish new lines of credit without the burden of years of bad credit causing a denial. This can be especially troublesome for the individual, since in most cases the scammer is operating within the law to create the new tax ID number which is actually a business tax ID. When the individual uses the new number, though, they are actually breaking the law and committing fraud? something that they often don't discover until it's too late and they're facing legal problems. In order to avoid these scams, just remember that anyone who offers instant results is just trying to take your money. All credit repair takes at least some time.

Other Consequences of Credit Repair Scams

In addition to losing your money to credit repair scams, it's possible to face legal charges, heavy fines, and possibly even jail time if you use falsified tax ID information or get involved in certain types of scams. If you are found to be a scam victim, the charges will often be dropped? but not always. Then, of course, there is the fact that you are still in debt and have even less money with which to repay what you owe; credit repair scams can often push people seriously in debt over the edge into bankruptcy.

Credit Repair Without the Scam

In order to repair your credit without getting scammed, check into consumer credit repair or other certified credit repair services. Check references and make inquiries with local police and consumer groups to make sure that they are legitimate, and follow their suggestions to help you to attain a debt-free life without the worry of credit scams. It may take longer this way, but it will be worth it in the end.

You may freely reprint this article provided the following author's biography (including the live URL link) remains intact:

About The Author

John Mussi is the founder of Direct Online Loans who help homeowners find the best available loans via the www.directonlineloans.co.uk website.

Cost Of Buying A New Car

Mon, 18 Aug 2008 06:04:23 +0000

Cost Of Buying A New Car

by: Joseph Kenny

One of life?s joys is buying a new car. The excitement of looking through those glossy brochures, choosing the brand, model, colour, plus the features is incredible. Ask most men and I?m sure they?ll tell you it?s one of the things they enjoy most in the world. And these days, with women reported to be involved in over 80% of all new car purchases, women are getting hooked fast on the pleasure of buying a new car.

However, if there is one thing that can detract from the enjoyment of buying a new car, it is the finances of the whole deal. This is not just speaking about the price of the new car, although this can be considerable. There is also the issue of all the hidden, and not so hidden extras that you have to pay for. For example, before you finalise the price of the car, you have to find out what features come as standard, and if you want to have any additional features, be they for safety, power, style or any other reason, you have to make sure that you calculate the extra cost of them into the price of the car.

Then, added to this is the delivery cost if there is one. Plus any other hidden dealer fees for whatever reason. Then you have to deal with financing charges. You may be one of the lucky people who can pay outright for their car, but most people will be using some style of financial product to cover the purchase price of the car. Either they?ll be leasing it from the dealer, or they?ll be relying on the dealer?s financing offers, or maybe you will have arranged a separate loan from your bank or other lender. Frequently there will be associated costs with the financing package and they should not be overlooked when calculating the cost of the car.

Add to this the cost of road tax. Road tax is calculated based on the size of the engine of the car. Then you will also need insurance. You should make sure you shop around and get the best possible price for your car insurance. You can choose between different levels of coverage depending on whether you want your own car to be covered or just third parties.

By the time you have added all of these extra expenses on to the purchase price of the vehicle you will be closer to knowing the true cost of the car. Make sure you can afford this figure and your car buying experience will be far more enjoyable.

About The Author

Joseph Kenny writes for the loan information sites http://www.selectloans.co.uk/ and also http://www.ukpersonalloanstore.co.uk. Select Loans have information and links to certain suppliers in the car loans http://www.selectloans.co.uk/CarLoans.html section of the site.