12 Financial Tab

8/3/2019 12 Financial Tab

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A Special Supplement

to The Delphos Herald

February 2012

2012

FINANCIAL

SERVICESGUIDE


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2 The Herald Financial Section February 2012

Submitted by JoAn Smith, CFPWith the New Year comes new rules,

and after two years with no inflation adjust-ments for Social Security, changes are

afoot for 2012. Most notably, those whoreceive Social Security and SupplementalSecurity Income benefits will see theirmonthly checks increase by 3.6 percent.

Though this is good news for those onthe receiving end, these inflation adjust-ments also have an impact on those whoare still contributing a portion of theirwages through Social Security taxes andthose who choose to begin receiving ben-efits early. The changes may not be dras-tic, but its important to consider them as

youre looking at your 2012 financial pic-ture whether youre still in the workforce,retired or planning to retire.

Higher earnings limitEvery wage earner is subject to the

Social Security (FICA) tax up to a maxi-mum earnings amount. The tax does not

apply after that earnings limit is reached.In 2011, the rate was 4.2 percent andthe earnings limit was $106,800, but isbeing raised to 6.2 percent and $110,100

for 2012. A similar tax applies to self-employed individuals.

The maximum contribution to SocialSecurity can rise significantly in 2012 asa result of the increased earnings limitand tax rate, and this adjustment will pro-duce extra tax revenues. The maximumemployee contribution to Social Securityunder the reduced earning limit and the2011 rate was only $4,486 in 2011, butwill increase to $6,826 in 2012 for those atthe top levels.

Currently, there are proposals in con-gress to extend the reduced, 4.2 percentrate for the employee portion of the SocialSecurity tax for 2012, but it is unclearwhether the extension will happen.

Note that all earned income is subjectto the 1.45% Medicare tax (the employee

portion is also matched by 1.45% employ-er portion). No earnings limit applies forthis tax. Beginning in 2013, this rate willincrease by 0.9 percent for an employeewhose wages are over a threshold of

$200,000 (or $250,000 for those who aremarried and filing jointly).

Earnings limitation for early retireesFull retirement age as defined by Social

Security currently stands at 66 years oldfor those born between 1943 and 1954,but retirement benefits can be collect-ed as early as age 62. Under the newadjustments, if you start accepting SocialSecurity prior to your full retirement ageand are still working and earning income,you could lose some of the benefits, but

those who work while collecting benefitsafter reaching full retirement age will nothave reduced benefits.

If a person under full retirement ageis receiving social security and has anincome that reaches $14,640 in 2012,his or her Social Security benefits couldbe reduced by $1 for every $2 of earnedincome above that limit. If 2012 is theyear you will reach full retirement age at66, you can earn as much as $38,880 (thelimit is lower for those who reached fullretirement age in 2011) before sacrificingSocial Security benefits. In that case, $1will be deducted from benefits for every$3 of income you earn above the limit. Inthe month you reach full retirement age,the earnings limit no longer applies. Fromthat point forward, there is no reduction ofSocial Security benefits regardless of yourearnings.

Keep in mind that once you beginreceiving social security benefits, youll

need to do a special calculation to deter-mine if these benefits may be included inyour gross income for tax purposes. Thosewith the lowest incomes do not pay taxeson Social Security benefits while those

with the highest may need to include upto 85% of benefits in their retirement taxcalculation.

Though the technical aspects may feeloverwhelming, its a good idea to knowwhere you and your family fall as thesechanges take effect in 2012, especiallyif your income is at or near the maxi-mum earnings subject to social securitytax, if youre planning for retirement orif youre about to begin collecting yourSocial Security benefits.

Remember that planning ahead is thebest way to mitigate the effects of theseand any other changes that may affectyour financial situation in 2012. Considerworking with a financial advisor or taxprofessional to help you create your over-all financial plan for the New Year and thefuture.

1The information in this article is cur-rent as of December 15, 2011.

Ameriprise Financial and its represen-tatives do not provide tax or legal advice.Consult your tax advisor or attorneyregarding specific tax issues.

Brokerage, investment and financialadvisory services are made availablethrough Ameriprise Financial Services,Inc. Member FINRA and SIPC. Someproducts and services may not be availablein all jurisdictions or to all clients.

2011 Ameriprise Financial, Inc. Allrights reserved.

Social Security sets inflation adjustments for 2012

Brokerage, investment and fnancial advisory services are made available throughAmeriprise Financial Services, Inc. Member FINRA and SIPC. Some products andservices may not be available in all jurisdictions or to all clients. Ameriprise Financialcannot guarantee uture fnancial results.

2012 Ameriprise Financial, Inc. All rights reserved.

Jobs may change.Retirement dreams dont have to.If youve left a job and have a 401(k) or other retirement accounts,

dont forget about them. Rolling over assets you have with former

employers or other institutions to an Ameriprise IRA can be

important in making your retirement dreams a reality.

Our Advisors. Your Dreams. MORE WITHIN REACH

Jo An M M. Smith, CFPpractitionerFinancial Advisor

227 N Main StDelphos, OH 45833

419-695-7010

[email protected]

www.ameripriseadvisors.com/joan.m.smith

Call me today at(419) 695.7010


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February 2012 The Herald Financial Section 3

Income Tax and Business Tax Preparation andAccounting Services, Payroll Preparation

Edelbrock-

Reitz LLC

419-695-1099edelbrockreitz.com

945 E. Fifth(by bowling alley)

Delphos

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OSTING TAX OFFICE

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Farm

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Pension Retirement Investments

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Weekdays 9-5;Sat. by Appt.;Closed Thurs.

[email protected]

ARA Your resolutions are made andyou even have a game plan to make sure2012 is the year you stick to them. Butbefore you can really get going on achiev-ing your personal goals in the new year,youll need to wrap up some unfinishedbusiness from 2011 your taxes.

Even though tax season comes everyyear at the same t ime, many Americans facetheir tax bill with no plan for how to man-age it. Facing unbudgeted debt is a situationthat can lead you to make reactive, desper-ate decisions that could negatively affect

your credit score and your finances longafter April 15. Similarly, an unexpected taxrefund that turns into fun money can be anopportunity lost when it comes to managingyour credit and overall financial health.

Not sure if youll owe? Visit IRS.gov foran online withholding calculator, or searchfor a free tax estimator. Many manufactur-ers of tax preparation software offer freeestimators on their web sites. Once youhave an idea of how much, if anything,youll owe, evaluate your payment options.Take steps to understand your credit, andconsider the relationship between tax bills,debt payments and credit before you decidehow you will pay your taxes.

Cash: Of course, the payment methodthat will have the least amount of impact onyour credit is to pay what you owe in fullwith cash. In this economy, that may not bea realistic option for many people.

Credit Cards: The IRS accepts creditcard payments, an option that has becomeincreasingly popular in the recent past. Butbefore you use plastic to pay your taxes,make sure you know your credit score,credit status and how both might be affectedif you use credit to pay your taxes.

Keep in mind that in addition to pay-ing interest on the balance carried on yourcredit card, you may face other fees and

conditions for using your card to pay yourtaxes. Check with both the IRS and yourcard issuer.

Loans: You may also opt to use a bankloan - such as a home equity loan - to payyour tax bill. Again, this method of paymentmay have a larger impact than just interestexpense. This loan will appear as debt onyour personal credit until you are able to

pay it off.Payment Plan: Another option for pay-ing your tax bill is to ask the IRS for a pay-ment plan. According to the IRS website,there are several payment options that couldhelp you if you cant pay your entire tax bill

at once. Research your options and followthe websites instructions for correspondingwith the IRS.

According to IRS.gov, if you file yourtax return, owe money and do not includeimmediate payment, the service will sendyou a tax bill. That bill initiates the collec-tion process, and will include an explana-tion of the balance due plus any penalties

and interest.Although you have many alternativesfor dealing with your tax bill, not filingyour tax return or not paying your bill arenot among them. IRS.gov points out thatbank or credit card interest rates and fees

are usually lower than the combinationof interest and penalties imposed by theInternal Revenue Code.

Finally, keep in mind that your taxes canprovide an opportunity to positively impactyour financial health. Avoid the temptationto turn a tax refund into fun money - or setaside only a small percentage towards thatpurpose - and use your refund to help pay

down outstanding debt. Lowering your ratioof credit used to credit available can helpimprove your credit score. And, if your debtis under control, consider applying yourrefund towards a retirement account. Oneday, youll thank yourself for doing so.

Planning for your tax bill?How it can affect your credit score


4/8


2011Receipts

ACCEPTING NEW PERSONALTAX RETURN CLIENTS

6 Experienced Preparers to Serve You.

John Nomina, CPA Clara Hanf, CPA Dennis Kapcar, CPA

Steve Hellman, CPA Jill Mohler Barb Kline

JOHN A. NOMINA, CPA202 N. MAIN ST., DELPHOS,

PH 419-692-3637Email: [email protected]

TaxesDue!

April17,2012

Combs& CompanyCERTIFIED PUBLIC ACCOUNTANTS

Serving the Delphos Community from our new location...East of Delphos on 309 behind Rent-All Mart

Accounting Service Corporate Taxes Agricultural Specialists Individual TaxesSince 1982

3610 Elida Road, Lima, Ohio Phone: 419-879-4012

Dan Combs, CPA Rick Combs, CPASue Trentman, Senior Staff Accountant

ARA Given todays economic andemployment outlook, the thought of payingfor higher education can be discouraging.The average cost of higher education for

students staying in their home state wasabout $6,400 and about $15,100 for out-of-state students in the 2009-2010 academicyear, according to a survey by the NationalCenter for Education Statistics (NCES).Looking at these statistics can be nerve-racking, but there is light at the end of thetunnel.

The U.S. government provides incen-tives, in the form of credits and deductions,to help decrease the economic impact ofpursuing a college education, accordingto Lisa Lewis, TurboTax blog editor and

CPA.Education credits can reduce your tax

bill or increase your refund while educationdeductions may lower your taxable incomeand result in reduced taxes, says Lewis.

The NCES revealed that nearly half ofAmerican undergraduates cut their collegeexpenses by an average of $700 by takingadvantage of tax credits or deductions.

American Opportunity Credit andLifetime Learning Credit

The education credits available throughDec. 31, 2012, include the AmericanOpportunity Credit and the Lifetime

Learning Credit.The American

Opportunity Creditis available to you or

your dependent forthe first four yearsof college if yourmodified adjustedgross income (AGI)is less than $90,000or $180,000 if mar-ried filing jointly.

If you are eli-gible to claim thecredit you can ben-efit from:

Up to a $2,500

education credit pereligible student.

Up to a $1,000refund even if youdont owe any taxesbecause 40 percent of the credit is refund-able.

If youre a professional student, theLifetime Learning Credit may be ideal foryou. With this credit, there is no limit on thenumber of years that can be claimed for youor your dependent, as long as your modifiedAGI is less than $60,000 or $120,000 if youare married filing jointly.

Benefits of the Lifetime LearningCredit include:

Up to $2,000 tax credit per tax return. Eligibility even if you or your depen-

dent takes only one class. Eligibility even if you or your depen-

dent are not pursuing a degree.Student loan interest deductionAccording to the NCES, 56 percent of

first-time, full-time students attending four-

year institutions had student loans. Withthe state of the economy, that percentage islikely to increase.

If youre repaying a student loan (dur-

ing school or after graduating) for you,your spouse or your dependent, you mayqualify to deduct student loan interest of upto $2,500 from your income subject to taxeven if you dont itemize your deductions.Generally the right to claim the tax deduc-tion goes to the person legally obligated topay interest on the qualified student loan.

Other qualifications include: Modified AGI of less than $75,000,

$150,000 if filing a joint return. The loan was taken out only to pay for

qualified education expenses.

The student must be you, your spouseor your dependent.

You, your dependent or spouse musthave been enrolled at least half-time in adegree program.

Qualified education expenses musthave been paid or incurred within a reason-able period of time before or after the loanis taken out.

Your loan was to attend an eligibleeducational institution.

Dont miss out on the opportunity to geta better education and reap the benefits ofthese tax breaks.

Education tax benefits help lower taxes


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CLARA L. HANF, CPAFinancial Advisor

T 419.692.4133 202 N. Main Street

T 800.999.2701 Delphos, OH 45833

F 419.692.2260 [email protected]

www.raymondjames.com/clarahanf

Raymond James Financial Services, Inc., member FINRA/SIPC

ARA Tax season is in full swing.Taxpayers receiving a refund tend to fileearlier in the year, while those who owe

Uncle Sam often wait until closer to the filingdeadline. Whether you file now or wait untilthe last minute, make tax time easier withthese tips.

Start by collecting all your tax documentsand information, including W-2s, 1098s,1099s, receipts and a copy of last yearsreturn. Worried about forgetting something?Use a tax return checklist like the one offeredat www.taxact.com/checklist.

Take a few minutes to get familiar withkey tax law changes and expiring tax breaks.Notable changes this year include an increase

in the standard deduction and standard mile-age rates, and an end to the Making Work PayCredit. A great place to start is by readingthe one-page section called Whats New for2011 in IRS Publication 17 at www.irs.gov.

Do your own taxes using an online ordownloadable tax preparation solution.Products are designed for both tax expertsand novices, guiding you step by step throughyour entire return, as well as your credits anddeductions. The programs do the math, com-plete the forms and identify possible errorsfor you. If you need help from a tax expert,

top solutions provide easy, in some casesfree, answers.

Although these easy-to-use solutions do thehard work for you, remember they cant nec-essarily catch your data entry errors. Commonerrors include incorrect Social Security num-bers, misspelled last names, and incorrectbank account numbers for direct deposit.Spend an extra minute or two checking thisinformation to avoid rejection of your return.

Its common to spend upwards of $50for a tax preparation solution, but there arequality free solutions. Compare free products

carefully, as there are important differences.Many experts consider TaxACT to be themost complete free federal product, as itincludes all e-fileable forms, free e-file, andfree tax help. If youre changing solutionsor filing for the first time, TaxACT in par-

ticular makes your experience easier withdata import and fast start options. You canusually try online products risk-free, so you

may find it worthwhile to take a couple fora test drive.Electronically file your return. More than

100 million taxpayers chose this easy, con-venient, and safe way to submit their federalreturns last year. E-filed returns are processedfaster than paper returns, and e-filers receiveconfirmation when their returns are pro-cessed, usually within minutes. If you owetaxes, you can e-file at any time and schedulepayment via electronic funds withdrawal orcredit card up until the filing deadline. Moststates encourage e-filed returns.

If youre among the three out of fourAmericans who receive a refund from theIRS, e-file and select direct deposit for thefastest receipt. Your refund can be depositeddirectly into up to three accounts in as few aseight days (instead of six to eight weeks formailed checks).

The deadline for filing tax year 2011federal and most state income tax returns isTuesday, April 17, 2012. Although you havea couple extra days to file, dont wait until thelast minute. Rushing can result in data entryerrors, and carefully reviewing tax credit and

deduction information could end up savingyou money. If youve experienced major lifechanges over the last year, allot extra time tomake sure you get all your tax benefits.

If you need more time to file, simply fileIRS Form 4868 for an automatic six-monthextension to file. Keep in mind an extensiondoes not extend your time to pay, so pay asmuch as possible by April 17. Filing late willland you a 5 percent per month penalty, upto a maximum for 25 percent of the unpaidbalance, and the failure-to-pay penalty is 0.5percent per month. Call the IRS to discuss

payment plans and options if you cant payyour bill in full.

More tax tips and information can befound at www.irs.gov. To learn more aboutTaxACT and its Free Federal Edition, visitwww.taxact.com.

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Tips for making tax time easier


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ARA Tax time is a stressful time,even for the most prepared filer. And forthe many people who arent perfectly pre-pared when the season rolls around, eachcommercial, ad or sign that mentions taxpreparation can be a painful reminder thatthe daunting task still lies ahead.

This year, dont let yourself be affectedby the stress or at least find ways to cutback on it. By avoiding these six commonmistakes, youll be making the process offiling your taxes a lot easier on yourself.

Mistake 1: Rushing to file by April 15

If you arent ready by the 15th, you dontneed to panic. Six month extensions are nowan easy-to-use option. You no longer haveto give a reason about why your taxes arentready by the initial deadline - just fill outand file Form 4868, and youll give yourselfsome extra time to get it all complete.

Mistake 2: Being a perfectionistOf course, you cant and dont want to

lie on your tax return, but you dont have topanic about making sure that each minutefigure is perfect. The IRS isnt going to huntyou down and send you to jail over a simple

mistake - even they understand that were

all human. If youve lost some informationthats necessary to your tax return, do yourbest to fill it out using reasonable estimates.Dont let perfectionism get in the way offiling.

Mistake 3: Going it aloneWe arent all tax experts, and that

becomes particularly clear when you startfilling out the labyrinthine forms. Andif youve had any major (or even minor)changes to your life this year, the whole pro-cess can get even more confusing. Gettinghelp from a tax professional is much more

affordable than you might imagine, and canpay off in a lot of ways, not least of whichcould be a lower overall tax bill.

Mistake 4: Not reviewing your workYou had to do it for your homework, but

you should be doing it for your taxes, too.Going back to your taxes with fresh eyescan help you catch mistakes or areas thatwere simply missed. Check the details. Areyour Social Security numbers right? Wereany credits or deductions missed?

Mistake 5: Being afraid to ask ques-tions

The old axiom there are no dumb ques-

tions applies to your taxes. If youre not anexpert, there will almost certainly be some-thing that you dont understand or find con-fusing. Luckily, there are plenty of resourcesout there that can answer your questions.You can go directly to the IRS web site orthe IRS help line, but if you still need moreassistance, ask your question at Equifaxsblog or check with a tax professional.

Mistake 6: Not being careful withdirect deposit

The advent of direct deposit has been abenefit to those waiting for their tax refunds,

but you have to do the footwork for the IRS.They can only deposit the funds into theaccount you tell them to use, so make surethat the information you provide is cor-rect. If theres a mistake and your moneyis deposited into the wrong account, its anightmare, at best, to get it back. At worst,you might not get it back at all.

Preparing taxes might never be yourfavorite activity, but it doesnt need to be apainful experience. Get the help you need,be cautious and dont let the stress get toyou - tax season will be done before you

know it.

Have you made these six tax mistakes?How to avoid them this year

ARA In the way of tax legislation, 2011 was a rela-tively quiet year. However, that doesnt mean there arenttax law changes that will affect this years tax returns.

The changes enacted at the end of 2010 will stillimpact this years and next years federal tax returns, saysTaxACT spokesperson, Jessi Dolmage. With the debateover the federal budget and taxes unlikely to end any timesoon, who knows if the soon-to-be expired tax breaks willbe extended. So, take advantage of all your benefits whileyou still can.

Three out of four taxpayers receive a federal refund,and last years average refund totaled $2,805. To help youmaximize your refund, here are some tax law changes you

should know about before filing thisyears return.

Your federal return must be filedby Tuesday, April 17, 2012. April 15 isa Sunday and Washington, D.C., is rec-ognizing Emancipation Day April 16.Dont use the extended deadline as anexcuse to procrastinate, though. Whenyou rush, youre more likely to makemistakes that could cost you money andtime. Furthermore, filing, paying or providing informationlate will result in IRS penalties that have increased thisyear.

Amounts for standard mileage, standard deductions,personal exemptions and the Alternative Minimum Taxhave increased. Note there are different standard mile-

age rates for miles driven before July 1 and after June 30.Details about all increases are in IRS Publication 17 atwww.irs.gov.

Among the tax breaks available last year but expired forthis year are the Making Work Pay Credit and AlternativeMotor Vehicle Credit (unless it was a new fuel cellvehicle). The Making Work Pay Credit was essentiallyreplaced by the payroll tax holiday for 2011. Employeesand self-employed already received the tax benefit in2011 paychecks through a reduction in the FICA-OASDISocial Security taxes. Unlike the Making Work Pay Credit,

employees who benefited from the pay-roll tax holiday dont need to claim it onthis years tax return.

Unless lawmakers extend them, thiswill be the last year to claim the follow-ing breaks: Tuition and Fees Deduction,Nonbusiness Energy Credit, the refund-able Adoption Credit, Educator ExpenseDeduction, option for those with item-ized deductions to deduct state and local

sales taxes paid in lieu of state and local income taxes paidand mortgage insurance premiums deduction.

The amount of the Health Coverage Tax Creditdecreased to 72.5 percent for qualified health insurancecoverage received between March and December 2011.

If you converted a traditional IRA over to a designated

Roth IRA in 2010, or rolled over a qualified retirementplan to a Roth IRA, but did not report the taxable amounton your 2010 tax return (due April 2011), you must reporthalf of the amount on this years return and the other half onyour 2012 return. Details are available in IRS Publication575.

With so much of your hard-earned money at stake andour complex tax law, its no wonder a growing number ofAmericans use tax preparation solutions.

For information about these and other tax law changesaffecting this years tax return, visit www.irs.gov.

Lynn R. Metzger Matthew L. Metzger

Martin R. HopkinsFinancial StrategiesPersonal Business

1337 North Cable Road Lima, Ohio 45805419-225-6067 Fax:419-225-6105www.metzgerfinancialservices.com

Metzger Financial ServicesM

Changes impacting your taxesand this years refund from Uncle Sam


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Getting the most backstarts with getting the

most expertise.At H&R Block, we believe you should never have to settle for anything less than the best

tax preparation. Thats why we require our tax professionals to take more than 84 hours

of specialty tax training. And then require them to pass hours of continuing education on

all of the tax law changes each year. So you can feel confident youre claiming every credit

you can and taking advantage of every deduction you have coming.

If you discover an H&R Block error on your return that entitles you to a smaller tax liability, well refund the tax prep fee for that return. Refund claimsmust be made during the calendar year in which the return was prepared. 2011 HRB Tax Group, Inc.

WE SPECIALIZE IN MORE COMPLEX RETURNS

JoAn Smith, EA, CFP, ATA, Franchise

227 N. MAIN STREET

DELPHOS, OHIO 45833

Phone: 419-692-1621

Mon.-Thurs. 9:00 am to 9:00 pm

Fri. 9:00 am to 6:00 pm

Sat. 9:00 am to 5:00 pm

Submitted by JoAn Smith, EA

A good education is the best thingyou can give yourself and your children.Uncle Sam recognizes the value of educa-tion and has given us credits and deduc-tions to help.

Hope Scholarship Creditthis credit isallowed for tuition and related expensesfor the first two years of post second-ary education. Students must be attend-ing classes at least half time pursuinga degree or recognized credential at aneligible educational institution. The creditmay be claimed for more than one family

member. A maximum credit of $1650 isallowed for tax year 2006.

Lifetime Learning Creditthis creditis allowed for up to 20 percent of theamount of the qualified tuition and relatedexpenses, not to exceed $10,000. Themaximum credit is $2000 and is allowedfor undergraduate and graduate levelcourses as well as any course of instruc-tion at an eligible institution to acquire orimprove job skills. There is no require-ment to be a half-time student, but the

credit is calculated on a per family basisrather than per student.

Credits may be taken for the taxpayer,

spouse, or a dependent. Dependents arenot allowed to take the credit. The creditsare not available for married filing sepa-rate returns or for nonresident aliens. Bothcredits have an income phase-out which is$45,000 to $55,000 for single and $90,000to $110,000 for married joint returns.

Eligible expenses for both credits aretuition and fees, including tuition paid byloans in the year the tuition is paid, notwhen the loan is repaid. There is a prepay-ment rule that allows a credit for expensespaid in one tax year for an academic

period that begins in the first 3 months ofthe following year.

For a deeper understanding of educa-tion tax credits, you may wish to contacta licensed tax practitioner, such as anenrolled agent.

The author is an enrolled agent, licensedby the US Department of the Treasury torepresent taxpayers before the IRS foraudits, collections and appeals. To attainthe enrolled agent designation, candidatesmust demonstrate expertise in taxation,

fulfill continuing education credits andadhere to a stringent code of ethics.

Lets Talk Taxes

Education Credits from Uncle Sam

Lets Talk Taxes

Paying for CollegeSubmitted by JoAn Smith, EA

Youve probably heard about the 529College Savings Plan. But what is it exact-

ly? The 529 College Savings Plan is one ofthe best savings incentives for college andsomething you dont want to miss out onif you have children or grandchildren. Thisplan is named for Section 529 of the InternalRevenue Code, which was passed into lawby Congress in 1997. This plan includescredits, deductions, and savings incentivesfor education.

The 529 incentive is designed to help fam-ilies save for the cost associated with futurequalified higher education. Contributionsto this savings plan are not tax-deductible.

However, provisions in the code allow forthe earnings to grow tax-deferred until thefunds are withdrawn to pay for higher edu-cation expenses. The plan allows flexibilityin choosing the portfolio that best fits yourneeds, while simultaneously allowing youto control withdrawals from the account foras long as it is maintained.

As of January 1, 2002, withdrawals fromplans used for qualified college expensesare free of federal tax. Family members or

friends can make contributions to 529 plansas well as parents. There is a much highercontribution limit for the 529 plan than for

other education savings plans. An addedbonus is the less binding income restric-tions. Most states offering the plan arepartnered with mutual fund companies thatactually manage the funds.

In addition to the 529 plan, there areother methods to help defray the high costof college, such as Coverdell EducationSavings accounts, education savings bonds,Hope Scholarship Credit, Lifetime LearningCredit, and the education loan interestdeduction.

If college plans are in your future, be

sure to check out all the different ways yourUncle Sam has established to help you withever-increasing college expenses.

The author is an enrolled agent, licensedby the US Department of the Treasuryto represent taxpayers before the IRS foraudits, collections and appeals. To attain theenrolled agent designation, candidates mustdemonstrate expertise in taxation, fulfillcontinuing education credits and adhere to astringent code of ethics.


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Tax Talk

2012

www.edwardjones.com/taxtalk

Roth IRA MAGI Contribution Limits

Filing Status 2011 2012 Contribution

Individual Less than $107,000 Less than $110,000 Full contribution

$107,000 - $121,999 $110,000 - $124,999 Partial contribution

$122,000 or more $125,000 or more No contribution

Married Filing

Jointly

Less than $169,000 Less than $173,000 Full contribution



Married Filing

Separately

$1 - $9,999 $1 - $9,999 Partial contribution


*You are eligible to contribute to a traditional IRA if you have earned income and are under the age of 70.

Funding your IRA is even easier this year. Use ACH on Demand*to transfer funds electronically into your IRA simply by logging

into Edward Jones Online Account Access. For more information,contact your Edward Jones nancial advisor.

* Automated Clearing House (ACH) is an electronic payment network used totransfer funds between accounts from dierent institutions.

Which IRA Is Right for You?

If you already contribute to an Individual Retirement

Account (IRA), then youre taking an important step

toward building the tax-advantaged nancial resources

you need for retirement. If you dont have an IRA, then

you might want to consider opening one.

But which IRA is right for you? You have two

main choices: a traditional IRA and a Roth IRA.

With a traditional IRA, your contributions may be

tax-deductible and can grow tax deferred. With a

Roth IRA, your contributions are nondeductible

but have the potential to grow tax free.

Although a Traditional IRA and a Roth IRA have

dierent tax treatments, the two do share two

common characteristics:

1. You can invest your funds in virtually any type

of investment you choose, such as mutual funds,

stocks, bonds and certicates of deposit.

2. You can contribute up to $5,000 each year for

2011 and 2012 to either IRA, or $6,000 if youreage 50 or older.

Its important to note a couple of dierences

between these two IRAs. Most investors are eligible

to contribute to a traditional IRA;* however, certain

income limits must be met to contribute to a Roth IRA.

The table below, which outlines the MAGI (modied

adjusted gross income) contribution limits, helps to

illustrate the dierences.

Andy NorthFinancial Advisor.1122 Elida AvenueDelphos, OH 45833419-695-0660

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Andy NorthFinancial Advisor

www.edwardjones.com/taxtalk

Roth IRA MAGI Contribution Limits

Filing Status 2011 2012 Contribution

Individual Less than $107,000 Less than $110,000 Full contribution



Married Filing

Jointly

Less than $169,000 Less than $173,000 Full contribution



Married Filing

Separately

$1 - $9,999 $1 - $9,999 Partial contribution


*You are eligible to contribute to a traditional IRA if you have earned income and are under the age of 70.

Which IRA Is Right for You?

If you already contribute to an Individual RetirementAccount (IRA), then youre taking an important steptoward building the tax-advantaged financial resourc-es you need for retirement. If you dont have an IRA,then you might want to consider opening one.

But which IRA is rigt for you? You have two mainchoices: a traditional IRA and a Roth IRA.With a traditional IRA, your contributions may be tax-

deductible and can grow tax deferred. with a RothIRA, your contributions are nondeductible but havethe potential to grow tax free.Although a Traditional IRA and a Roth IRA have dif-ferent tax treatments, the two do share two commoncharacteristics:

1. You can invest your funds in virtually any type ofinvestment you choose, such as mutual funds,stocks, bonds and certificates of deposit.

2. You can contribute up to $5,000 each year for

2011 and 2012 to either IRA, or $6,000 if youreage 50 or older.

Its important to note a couple of differences be-tween these two IRAs. Most investors are eligible tocontribute to a traditional IRA;* however, certain in-come limits must be met to contribute to a Roth IRA.The table below, which outlines the MAGI (modifiedadjusted gross income) contribution limits, helps toillustrate the differences.

Taxes Dont Have a Season.

Too often, the thought of how to reducetaxes only occurs during March and Aprilas the tax deadline approaches. Your taxesare determined when a transaction is made,so potentially reducing your tax bill - andplanning ahead - should be a year-roundendeavor.

Consider these five things to help you be-come tax-smart.1. Know which tax deductions/credits youcan take.When you work with your tax profes-sional, be sure to be aware of any deductionsor tax credits you might be eligible to take.Examples of tax credits include: Retirement savings contribution credit Education credit

Child and dependent care credit

Examples of tax deductions include: IRA contributions Health savings account contributions

Tuition and fees

2. Tax-diversify your savings. Differenttypes of tax-favored accounts have differentbenefits. For example, with a traditional IRA,your contributions may be tax-deductible andcan grow tax deferred. With a Roth IRA, yourcontributions are nondeductible but distribu-tions you take during retirement are tax-free.1

Each IRA provides benefits that could provemore valuable depending on future tax rates.But while your situation and the tax code maybe anything but constant, one thing is certain:An important benefit of having money in dif-

ferent types of tax-favored accounts (i.e., taxdiversification) is flexibility when its time towithdraw your funds.3. Fund early. If you wait until the tax dead-line to fund your IRA each year, you miss up to

15 months of potential tax-deferred growth onyour contribution.For example, many people will wait until April15, 2013,2 to contribute to their IRAs for 2012when they could have funded them as earlyas Jan. 3, 2012. Although 15 months may notseem like a significant amount of time, it mayconsiderably impact your retirement savings.4. Directly deposit your tax refund into yourIRA. Your 2011 tax refund is one way to helpadd to your retirement savings goals. You caninstruct the IRS to directly deposit your tax re-fund into as many as three separate accounts.This includes any checking, savings and retire-

ment accounts, such as an Edward JonesIRA. Even if you use only a portion of yourrefund for retirement savings, your 2011 taxrefund can help make it a little easier to worktoward your retirement goals.

5. Schedule a complimentary portfolioreview. Lots of times, changes in life affectyour investments. Thats why we encourageour clients to schedule a portfolio review atleast annually with their Edward Jones fi-nancial advisor. Well talk about any chang-es in your life and help you decide whetherit makes sense to revise your investmentsbecause of them.

1. Earnings distributions from a Roth IRA may be subject totaxes and a 10% penalty if the account is less than five yearsold and the owner is under age 59 1/2.2. The tax deadline in 2012 is April 17 and in 2013 is scheduledfor April 15.

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