Editor: IRS Newsletter

Some people take an early withdrawal from their IRA or retirement plan. Doing so in many cases triggers an added tax on top of the income tax you may have to pay. Here are some key points you should know about taking an early distribution:

1.Early Withdrawals.  An early withdrawal normally means taking the money out of your retirement plan before you reach age 59½.

2.Additional Tax.  If you took an early withdrawal from a plan last year, you must report it to the IRS. You may have to pay income tax on the amount you took out. If it was an early withdrawal, you may have to pay an added 10 percent tax.

3.Nontaxable Withdrawals.  The added 10 percent tax does not apply to nontaxable withdrawals. They include withdrawals of your cost to participate in the plan. Your cost includes contributions that you paid tax on before you put them into the plan.

A rollover is a type of nontaxable withdrawal. A rollover occurs when you take cash or other assets from one plan and contribute the amount to another plan. You normally have 60 days to complete a rollover to make it tax-free.

4.Check Exceptions.  There are many exceptions to the additional 10 percent tax. Some of the rules for retirement plans are different from the rules for IRAs. See IRS.gov for details about these rules.

5.File Form 5329.  If you made an early withdrawal last year, you may need to file a form with your federal tax return. See Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, for details.

6.Use IRS e-file. Early withdrawal rules can be complex. IRS e-file is easiest and most accurate way to file your tax return. The tax software that you use to e-file will pick the right tax forms, do the math and help you get the tax benefits you’re due. Don’t forget that with IRS Free File, you can e-file for free. Free File is only available through the IRS website at IRS.gov/freefile.

Editor: Crass Cash

http://finance.yahoo.com/news/how-to-bank-hundreds-of-dollars-more-each-month-163549084.html

Please read this short article about what Dr. Shiller a noble price winning economist at Yale.  I've been saying this exact same thing for years, but I guess since a noble prize winner said it, now it makes it legit.  Meh.  

When I lived in college I lived a pretty normal lifestyle.  I lived off of $12,000 and they were some of the best years of my life.  Now I live off of 3 times that much!  WTF happened?!  If I could get back to that level I could have retired long ago.  For some reasons this is impossible, namely because of things like health insurance.  Plus I don't want to live off of ramen noodles for the rest of my life.  I am outlining a plan that should cut my costs by around $300 a month from my expenses. 

Editor: IRS Newsletter

If you receive Social Security benefits, you may have to pay federal income tax on part of your benefits. These IRS tips will help you determine whether or not you need to pay taxes on your benefits. They also explain the best way to file your tax return.

• Form SSA-1099.  If you received Social Security in 2014, you should receive a Form SSA-1099, Social Security Benefit Statement, showing the amount of your benefits.

• Only Social Security.  If Social Security was your only income in 2014, your benefits may not be taxable. You also may not need to file a federal income tax return. If you get income from other sources you may have to pay taxes on some of your benefits.

• Free File.  Use IRS Free File to prepare and e-file your tax return for free. If you earned $60,000 or less, you can use brand-name software. The software does the math for you and helps avoid mistakes. If you made more than $60,000, you can use Free File Fillable Forms. This option uses electronic versions of IRS paper forms. It is best for people who are used to doing their own taxes. Free File is available only on IRS.gov/freefile.

• Interactive Tax Assistant.  The IRS has a helpful tool that you can use to see if any of your benefits are taxable. Visit IRS.gov and use the Interactive Tax Assistant.

• Tax Formula.  Here’s a quick way to find out if you must pay taxes on your Social Security benefits: Add one-half of your Social Security to all your other income, including tax-exempt interest. Then compare the total to the base amount for your filing status. If your total is more than the base amount, some of your benefits may be taxable.

• Base Amounts.  The three base amounts are:

o $25,000 – if you are single, head of household, qualifying widow or widower with a dependent child or married filing separately and lived apart from your spouse for all of 2014

o $32,000 – if you are married filing jointly

o $0 – if you are married filing separately and lived with your spouse at any time during the year