Thursday, January 24, 2013

Will Tax Benefits Later Cost You Now?

<.li> Double the Benefit of Your Financial Planning By Avoiding Tax Traps

Russell Holcombe, an Atlanta-based financial planner, identifies four investment vehicles with long-term investment potential which may have short-term shortcomings.  His "yellow lighted" investments include: Roth IRA investments (federal exemption of Roth distributions may not apply at the state level); 401[k] plans (remember that tax penalties may apply if you need this money before 60); debt (remember the interest cost and the inflexibility of debt payments) and college plans such as 529 plans (taxes are saved to be sure--but money is tied up for about 20 years AND your child will need to qualify for and choose to attend a qualifying educational institution).

Like health savings plans and other shorter-time frame choices, Holcombe's valid point is that you LOOK not only at the tax savings, but the overall consequences of the investment.  Do not go blindly into any investment.

Friday, January 18, 2013

Identity Theft: When a Rogue Tax Preparer Could Cost You More than a Filing Fee

  • ID Theft Risk with Tax Prep

  • Paul Mancinone, an attorney/CPA writing for Accounting Today, notes that the lateness of the "fiscal cliff" agreement puts taxpayers at additional risk of identity theft (he recommends that clients file as early as possible).  One reason--the IRS is still putting together forms and schedules, thus many taxpayers may have trouble filing before the end of February.  In addition to early filing, Mancinone has the following advice: be wary of preparers who want a percentage of the refund as well as those who refuse to sign a return; look for an attorney, CPA, EA or RTP to prepare the return and ask specifically how the preparer will protect personal information before hiring him/her/them to prepare the return.

    While a rogue tax preparer/identity thief would be the most unsettling of possibilities; sloppy work by tax preparers can also cause a lot of grief for both preparers and clients.  The advice of Mancinone may seem routine for tax professionals (and remember that tax credentials do not automatically equate to ethical behavior), but clearly many people have been hurt by NOT taking Mancinone's advice.

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