JUNE 2011
Khaas Baat : A Publication for Indian Americans in Florida


By Kamlesh H. Patel, CPA

Did you receive a big refund check from last year’s taxes? If so, you’re not alone. Many of us deliberately pay extra taxes throughout the year so we can enjoy a nice bonus early the next year. Sometimes it’s insurance against having to come up with extra cash when you file your return. That’s a valid concern. But sometimes it’s just a form of enforced saving. Or perhaps you’ve simply never bothered to adjust your withholding. Those aren’t such good reasons. After all, when you overpay your taxes, you’re making an interest-free loan to the government.

Should you adjust your withholding? Reducing your withholding is as simple as filing a new Form W-4 with your employer. The form comes with a worksheet to figure out how many allowances you should claim. Don’t forget to allow for other taxable income besides wages, such as dividends or investment gains.

If you’re worried about underpaying tax, there are a couple of rules you should know. Generally, you’ll escape a penalty if you pay, through withholding or quarterly estimated payments, at least 100% of last year’s taxes (110% if your adjusted gross income is over $150,000), or if you pay at least 90% of what you owe for this year.

If you reduce withholding, here are some ideas on how to use your extra take-home pay:

How to deal with finances after a spouse’s death

When a husband or wife dies, the surviving spouse may face unfamiliar financial decisions and issues. If you’re in such a difficult situation, here are a few guidelines to help you cope.

Locate key documents. Look through your house and safety deposit box for wills, life insurance policies, marriage certificates, property deeds, and other records. You’ll need these for updating account information and claiming benefits.

Order at least ten certified copies of your spouse’s death certificate. The certificate is needed as proof of death for life insurance claims, social security and retirement benefits, and switching account information. Copies can be obtained from the local health department.

Postpone major decisions. Now is not the time to relocate, overhaul your investment portfolio, or make luxury purchases. Think twice about paying off your mortgage. If at all possible, don’t withdraw money from IRAs or 401(k) plans. Wait until you’ve had time to develop a long-term financial plan.

Review benefit options. Contact the Social Security Administration to find out about survivor benefits. Also call your spouse’s former employer to find out about employee benefits such as payouts of unpaid salary, unused vacation or sick days, and pensions. Some companies also may allow you to continue group healthcare coverage.

Decide how you’ll handle life insurance proceeds. Benefits may be paid in a lump sum or an annuity. If you take proceeds in a lump sum, you’ll want to consider placing them in short-term, interest-paying investments to ensure that the money is readily available.

Consider filing a disclaimer. Disclaimers allow you to relinquish claims to certain assets, helping you avoid inheritance and estate taxes. File within nine months of your spouse’s death.

Get competent legal and financial advice. Seek out qualified and trusted professionals to help you through the process of probate, taxes and planning for your financial future.

Kamlesh H. Patel, CPA, can be reached at (813) 949-8889 or e-mail kpaccounting@verizon.net or kpinsurance@verizon.net.

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