Roth Conversions and the 5 Year Rule

If you convert your regular IRA into a Roth IRA, you can't take a distribution from the Roth for five years without a 10% penalty unless you meet some specific exceptions. After five years, you can withdraw the conversion amount, but not any earnings penalty free even if you are under age 59 1/2. Each conversion amount is subject to its own five year period.

Top Five Ways to Help Your Tax Preparer

The 2012 tax return filing season is upon us and if you would like to make it easier on your busy tax preparer, please consider the following top 5 ways you can help.

5. Use email to respond to questions from your tax preparer or to ask tax questions. This is an efficient way to communicate and saves time for both of us. Mail or drop off your tax work. Usually if you are a longtime client with no significant changes, there is no need for an office appointment.

4. Provide annual totals of amounts for the year. For example add up all your medical bills for the year and give the preparer the total only. You don't want the preparer spending time adding up individual receipts.

3. Don't provide receipts for expenses. Put just the amounts in a worksheet or on an organizer and total them.

2. Answer the tax preparer as soon as possible when you get follow up questions so that your tax return can be completed promptly.

1. The number one way you can help your tax preparer is to fill out the tax organizer as completely as possible and provide all tax information forms that are reported to the IRS such as 1099s.

Thank you.

Death and Taxes by State

Federal estate tax now only kicks in if the individual's estate exceeds $5.25 million which exempts most estates from the death tax. This is also true in 29 states including Georgia that have no state estate or inheritance taxes. Maryland and New Jersey get the prize because they impose both an estate tax and inheritance tax. Wealthy taxpayers there need to move before they die. Six states only impose an inheritance tax. Generally, inheritance taxes are levied on  recipients who are not direct relatives. For example, Maryland charges a 10% inheritance tax on all money paid to a niece, nephew, friend or other unrelated person, but none to children, grandchildren or spouse.  19 other states and the District of Columbia have an estate tax that generally starts after a $1 million exemption and a top rate of 16%. Illinois is the most recent state to impose an estate tax with a $4 million exemption effective 1/1/2013.

Georgia's New Car Tax

All cars bought on or after 3/1/2013 will be exempt from sales tax and the annual ad valorem tax. Instead you will pay a one-time 6.5% title ad valorem tax based on the value of the vehicle. The rate goes up to 6.75% in 2014 and 7% in 2015. It can never go above 9% per statute. You also can opt into the new law if you bought a vehicle 1/1/2012 through 2/28/2013 by paying any difference if any between what you've already paid in sales tax and ad valorem tax and the new 6.5% rate beginning 3/1/2013. There is a calculator on the GA Dept of Revenue website that can help you decide. You have until 1/1/2014 to decide whether to opt in to the new tax. I believe it will be advantageous for those eligible to opt in since most county sales tax rates alone exceed 6.5%. This new tax does not appear to be deductible as personal property tax since it is not charged on an annual basis so that is one downside. Overall this is a great deal for Georgia's taxpayers.