The Tax Questions Blog

Archive for June, 2009

New Roth IRA Edge For The Wealthy

Roth IRAs can be a sweet deal. If you've invested wisely so that you expect your income tax rate to rise in the future, including retirement, a Roth typically hands you more after-tax money than a traditional IRA.

Question: What is an intra-community VAT number?

Hi
My wholesale supplier has asked me to provide them with an intra-Community VAT number:
This is the individual VAT number given to all taxable persons in the European Community.
I am not VAT registered and am a sole trader.
I am a higher rate taxpayer.
How do I get such a VAT number without formally registering for VAT?
Thanks
Trudy

Answer: You cannot get a VAT registration number without being registered for VAT. You must register if your vatable supplies exceed £61,000 pa. but you can register voluntarily. This may be necessary if your wholesale supplier insists on having the number (as they are apt to do!). It may not be all bad news if you register, since you will be able to reclaim input VAT charged on your purchases and expenses. Your accountant can help you with this.

The amount of income tax you pay is not relevant to your VAT situation.

Health Care Reform's Terrible, Tiny Tax

A friend who, like me, is in an industry where contract and freelance workers are prevalent, just shared his dismay over the new rules for income reporting that were passed as part of health care reform.

Question: What does this mean in relation to a 529 plan?

The principal portion of rollovers and nonqualified withdrawals from this plan within two taxable years of the contribution are included in Rhode Island taxable income to the extent of prior Rhode Island tax deductions. I am trying to figure out if I can deduct what I contributed for my child. Thanks.

Answer: What this is saying is that if you take a non-qualified withdrawal or roll your funds over to another 529 program and you took the state tax deduction, you'll have to add the amount you deducted back into your taxable income in the year you took the withdrawal. Looks like this only applies for the 2 yrs after you made the contribution and took the deduction.

So, if you made a contribution during 2008, you can take the tax deduction. If, however, you take a non-qualified withdrawal or rollover to another 529 plan within the next 2 years, the amount you took as a deduction would be added back to your adjusted gross income. They're basically rescending the tax deduction if you rollover or take a non-qualified withdrawal within 2 years.

Take note of temporary 'technology change' for qualified 529 Plan distributions

If your 529 plan is over-funded and you are seeking ways to make distributions from it, you may be in luck. Computer, peripherals, software purchases and Internet access costs — if incurred/paid in 2009 and 2010 — may qualify for a non-taxable distribution from the Section 529 plan, even if the family uses them.

Question: Tax on gift money in canada?

Ok my Father runs a business and he wants his profits / savings to be in safe hands so he wants to send me his savings every year which is around 35-40K US$ to my name/account here in Canada.

Now, I have following questions

1- I know GIFT money is not taxable but can he send me this much amount every year and will Canadian Government will not raise any issues with this seeing that this amount is coming to me every year ? Is there any limit on number of times gift money can be sent.

2- Can i get house mortgage in Canada since I am planning to invest this money in real estate and will pay the money as down payments.

Please advise and share your ideas as soon as you can.

Thanks
MH

Answer: Yes, he can send this money every year. The money presumably is tax paid in its origin country, so it can enter Canada tax free.

The money can be used as a down payment on a home. Whether you can get a mortgage depends on your personal income, your credit, etc. Since this money is not income, you can;t use it as such to qualify for the mortgage, you'll have to have enough 'normal' income to qualify.

Capital gains, estate taxes change in R.I.

Two big changes in Rhode Island tax law are now in effect, and they're worth keeping in mind.

Gifts, Gafts, Gefts - What Constitutes a Gift and a Principled Tax Policy Justification...

Question: How much should I get back this year on my tax return?

I live in Southern California. I've made $36,000 this year in taxable wages. They've withheld $3,700 in income tax withheld and $2,200 in social security withheld.

I just did some tax prep online with TaxACT and TaxSlayer, and both of them told me I'll need to PAY $179 to State but that I'll receive $10 from Federal.

This seems incredibly erroneous to me. Do I need to go to a tax professional? Aren't I supposed to be getting more money back? I'm worried I may not be including expenses and deductions that could get me the most back this year. Please help!
I am single, not claiming any dependents, but I live with my partner and we both pay rent on an apartment. Does that count for anything? lol I know taxes suck, and I'm frustrated by them. Are there any kind of deductions I'm missing?

Answer: Single taxpayers that make more than minimum wage, and do not own a home, are taxed at the greatest percentage.

From what you describe and without bothering to go and look it up, it sounds about right.

I never saw more than $30 back from the feds for a decade.

Looks don't matter - it's what's inside that counts

In your article the specification of the perfect banana does not mention flavour (''What's being dumped because it's not this long?'', January 8). This supports my long-held view that supermarkets are obsessed with appearance and shelf life to the detriment of flavour.

683-MUS #12......Montana FREEMEN in court..........