friday night at the fights

I'm trying to do some forecasting (related to job search activity) and came across an AWESOME financial site -- MoneyChimp.

Here are some quick and easy calculators I recommend from the site:

• Roth IRA contribution limits
• Roth IRA retirement calculator
• Compound interest calculator
• Federal tax brackets

I definitely recommend clicking around the site to learn more. Pretty cool. (Caveat -- I just hope their calculations are correct!)

the obligatory post on tax deductions

Tis the season to do your taxes, or find an accountant. Thanks to two moves last year, working in three different states and pure joy at the thought of having a professional wade through the mess that is our tax code, I'll be going the latter route.

Whether you're hiring someone or doing it yourself, here is a list of deductions to remember (courtesy of the March issue of Money):

• Phone tax credit: Congress recently repealed a 3% long-distance excise tax, allowing people to take a one-time credit covering what you paid between 3/1/03 and 7/31/06. My unprofessional and non-liable advice, take the standard amount ($30-$60), instead of itemizing.
• Job search expenses: Looked for a job last year? You can deduct stuff like resume paper, travel costs, etc.
• Investment fees
• Unreimbursed work expenses: Such as joining a professional association on your own dime.
• Subscriptions for career-related publications
• Tuition payments: Also, don't forget about interest paid on your student loans.
• State tax: You have the option of deducting state and local income tax you paid or the sales tax you paid, whichever is higher. If you didn't keep receipts, use the sales tax table in IRS Publication 600.

carnival of personal finance #87 is up!

The latest Carnival of Personal Finance is up at 2 million's blog. There are a couple of good tax-related posts ('tis the season), including one on overlooked deductions and relief of tax headaches. My post about going over my IRA limit was also included, though buried deep down. =)

Definitely check it out !

good tax help hard to find

Thanks to my friend's recommendation, I went to see an accountant today for help on my 2006 taxes. Man, was the wait long. It was actually the second time I went to see the guy, but the first time was around lunch time, and there really was no hope to get in within a reasonable time period.

Today, I thought I'd be smart and get there by 10. I was smart, as it only took an hour before I got in front of the guy. Alas, things were not to smooth all the way.

Turns out that my company made a mistake on my W-2. I had worked in another state for 8 out of 12 months last year, but my company put all of my annual income as wages in my current state. That is exacerbated by the fact that my original state had no state income taxes, and my current one does. The tax hit would be significant based on the incorrect information.

So now, my task is to track down my payroll department to issue a corrected W-2 before the end of the month (since I'll be out of town for pretty much all of March). The alternative is to provide the accountant with all of my paystubs, starting when I first worked in New York, and he could make adjustments accordingly. It'll be more of a hassle (and I suspect, more time-consuming and expensive) but it's good to know there's a fallback option in case my payroll rep isn't as responsive as he/she needs to be.

One other nice surprise -- turns out my company accounted for my relocation expenses in such a way that they were the ones who got to deducted the full amount from their taxes, not me. That leaves me with a miniscule deduction (hooray for my company -- bastards). The accountant said it shouldn't be a problem assigning the relocation income to my original state, which has no income tax. My fingers remain crossed. =)

recharacterizing my roth ira contribution - continued

Due to my need to recharacterize my 2006 Roth IRA, I had sent Fidelity an email asking how to go about that. Below is their response:

Yes, you can recharacterize the $4,000 Roth IRA contribution to a non-deductible Traditional IRA.

There are no tax implications for recharacterizing to a Traditional IRA before April 17, 2007. With a recharacterization, Fidelity would transfer your 2006 Roth IRA contributions, plus any earnings the contributions have made this year, and move to a Traditional IRA account as your 2006 contribution. Since you do not have a Fidelity Traditional IRA account, you would need to establish a Traditional IRA. While the deadline is April 17, 2007, Fidelity needs to receive your Recharacterization request no later than April 10, 2007 in order to complete process by April 17, 2007.

If you timely file either a Federal tax return or an extension request, the IRS automatically provides a 6-month extension to process a recharacterization for the prior year.

To establish a Traditional IRA account, you will need to fill out a Fidelity IRA application. You can fill out the application online and submit it electronically, or I can mail a new account application to your home.

To access the new account application online:
1. Please go to http://www.Fidelity.com
2. At top of page, click the link "Open an Account" and then the "Open Now" link.
3. On left hand side, choose the "Traditional or Roth IRA" link
4. At this point, you will be asked to either fill out and submit the application online or fill out, print, and mail application to Fidelity.

Please fill out the "Fidelity Request for Recharacterization Form" to request the recharacterization. Upon receipt we will recharacterize your Roth IRA into a Traditional IRA.

You can download this form at our Web site:
http://personal.fidelity.com/retirement/pdf/crechar.pdf

Please complete the form and return to Fidelity for processing. You will have your confirmation letter within three to five business days of Fidelity receiving your request.

Please note that non-deductible Traditional IRA contribution and recharacterizations are both normally reported on IRS Tax Form 8606.

Sounds easy enough, right? Now, it's time to execute. It's nice to find out that as long as I file my taxes on time, I'll have an extension to get this recharacterization completed correctly. It wasn't that exciting, however, to see that yet another IRS tax form will be needed. =\

five things to get audited on your taxes

Who wants to have their tax returns audited? I do!

Just kidding.

Anyway, a nice article on CNN Money about tax audit red flags.

On an side note, it's getting really depressing to know that I've exceeded the income threshold that'll increase the odds of my getting audited -- depressing because I didn't even really make that much in 2006. Stupid relocation costs! =P

stock award vesting

Yesterday was my one year anniversary at work. That also meant that 1/5 of the total stock award I received when I joined was going to vest. I was all excited. I mean, the total number of shares involved wasn't much, but still, I thought it'd be a nice lil' bonus. I had received 170 shares total as part of the award, and on the 16th, I was expecting 34 to vest.

I checked my Fidelity account today and saw that only 19 shares had been transferred. "Do they do transfers in piecemeal?" was the question that first popped into my mind. I did a lil' reading on the company site's FAQ on stock awards, and found out that 19 was, indeed, all I could look forward to.

You see, there's this thing called taxes. When stock awards vest, it’s a taxable event and as such, the fair market value of the shares vested is considered compensation income. Therefore, when my first batch of stock vested, it was converted into an equivalent number of common shares, and then the required tax withholding would be paid with a portion of the shares that vested. What remains after gets transferred to my Fidelity account.

It’s a real bummer when over 44% of the number of shares you were expecting gets zapped because of taxes. Damn Uncle Sam. =P