Archives for September 2017

The Cost of Borrowing from Your 401(k) Plan

September 26, 2017 by Frank

If your employer has a 401(k) plan, the plan likely has a provision that allows you to borrow from the plan. Although the plan will charge you interest on the amount borrowed, the repayment of the interest and amount borrowed go back into your 401(k) plan. So regardless of the rate of interest charged, whether it is 3% or 5%, isn’t your net cost of borrowing zero because you are paying yourself? Doesn’t it sound like an interest-free loan?

If it were truly an interest-free loan, would it not make sense to borrow as much as possible from your 401(k) plan? After all, if the plan charges a 5% interest rate, where in today’s market can you earn 5% guaranteed? Should you borrow the max from your 401(k) plan to maximize your financial wealth?

The misconception about these plans is that [Read more…] about The Cost of Borrowing from Your 401(k) Plan

Will Tax Returns Require a Selfie?

September 19, 2017 by Frank

Tax jurisdictions are prime targets for hackers and scammers. Identify theft of a person’s social security number, date of birth, W-2 information, and other data allow thieves to file false tax returns and claim false refund claims.

What are states doing to combat ID theft? The first line of defense is that states are delaying the issuance of refunds to allow them more time to verify that the tax returns filed are actually those of the taxpayer and not those of a thief. Taxpayers’ situations are not static and can change significantly during the tax year (e.g., new job paying a higher salary, additional dependent, marital status change, etc.) Accordingly, working with your tax professional during the tax year to ensure that significant overpayments are not made is more important today than ever.

Four states (AL, IL, OH, NY) require that taxpayers who e-file their returns provide their driver license information. Some states allow taxpayers to provide this information on a voluntary basis. It has been rumored [Read more…] about Will Tax Returns Require a Selfie?

Filing an Extension of Time to File Form 1040 – The Good, the Bad and the Ugly

September 12, 2017 by Frank

There are many taxpayers who experience great angst to learn that their return cannot be filed by the due date of April 15 and need to file for an extension of time to file until October 15. There are other taxpayers, for whatever reason, the filing of an extension is a regular, annual occurrence.

First, we need to discuss a few truisms: [Read more…] about Filing an Extension of Time to File Form 1040 – The Good, the Bad and the Ugly

Will Colleges & Universities Finally Be Required to Properly Complete Form 1098-T

September 5, 2017 by Frank

The 2015 Protecting Americans from Tax Hikes Act (Act) required that colleges and universities (colleges) report the actual amount paid by students (or their parents) for qualified tuition expenses. What the colleges have been reporting is the amount billed for qualified tuition expenses. Amounts paid are shown in box 1 of Form 1098-T; amounts billed are shown in box 2.

Due to the above practice by colleges and IRS due diligence requirements imposed by the IRS on those preparing tax returns claiming the American Opportunity Tax Credit, tax preparers needed to request that taxpayers provide them with cancelled checks, bursar statements showing the amounts paid, or other forms of proof of payment to properly compute the educational credits. Thus the current practice by colleges placed a burden upon those claiming tuition credits and upon tax preparers.

It has been reported [Read more…] about Will Colleges & Universities Finally Be Required to Properly Complete Form 1098-T