FEBRUARY 2012
Khaas Baat : A Publication for Indian Americans in Florida

Accounting

who has to file a 2011 income tax return?

By Kamlesh H. Patel, CPA

Taxes are a frequent topic of conversation at this time of year, and a common question is, who has to file a tax return? The rules for filing 2011 tax returns are straightforward for most people.
Single taxpayers (including those who are divorced or legally separated): If you’re under 65 and had gross income of at least $9,500 in 2011, you must file. If you’re 65 or older, the cutoff is $10,950.
“Head of household” taxpayers (generally, unmarried people who provide a home to a child or other dependent): If you’re under 65 and had income of at least $12,200, you’ll need to file. If you’re 65 or older, the cutoff is $13,650.

Married taxpayers filing jointly: Filing is required if both spouses are under 65 and income is at least $19,000. If one spouse is 65 or older, the cutoff is $20,150. If both spouses are 65 or older, gross income must be at least $21,300 to require filing. If you were married but not living with your spouse at the end of 2011, filing is required if you have income of $3,700 or more, regardless of your age.

Married taxpayers filing separately: If you made at least $3,700, you must file, regardless of your age.

Different IRS rules govern filing for certain widows and widowers, dependents, those who owe special taxes (e.g., self-employment tax), children under age 19, and aliens. If you have a refund coming, you will want to file regardless of your income level.

It’s worth looking into your filing requirements. This year, you may not have to file at all. The IRS doesn’t want people to file income tax returns that aren’t necessary. The reason is simple: Processing tax returns takes time and money. The IRS doesn’t want to use its resources handling returns that weren’t required in the first place.

TAKE TIME TO CHECK YOUR WITHHOLDING

Did you receive or are you expecting a big refund on your 2011 taxes? Or worse still, did you wind up with an unexpected tax bill? In either case, it might be time to adjust your withholding.

Many people like to receive a refund from the IRS – they look upon it as a form of forced saving. If you’re of this opinion, that’s fine. But too big a refund means you’re wasting your money, giving an interest-free loan to the government.

On the other hand, if you underpaid your taxes by more than $1,000 and don’t meet certain other exceptions, you could be hit with a penalty. All sorts of things can cause underpayment of taxes. You might receive interest, dividend, or tip income on which no taxes are withheld. If you’ve been unemployed, your unemployment benefits could increase your tax bill. And, of course, if you’re self-employed, it’s your responsibility to make estimated tax payments. These should cover both income taxes and FICA taxes (Social Security and Medicare).

There are two ways to adjust the taxes you pay. If you’re an employee, you can file a new Form W-4 with your employer. To increase withholding, you can either reduce the number of exemptions you claim on the W-4, or you can specify an extra dollar amount to be withheld from every paycheck. Alternatively, you can make estimated tax payments to cover the taxes you owe in each quarter.
However you do it, you should adjust your 2012 withholding to match the taxes you expect to owe for 2012.

Kamlesh H. Patel, CPA, can be reached at (813) 949-8889 or e-mail [email protected] or [email protected].


Finance

Role Reversal: When Children Should Talk to Parents About Money

By SEEMA RAMROOP

As Baby Boomers grow older — and presumably wiser about economic matters — more are finding themselves in a position of caretaker for elderly parents. Raising the topic of money with parents can be difficult. But with the right choice of words, timing and tone, you can open the door to a meaningful conversation.

Select a representative. An initial conversation about finances should be done one-on-one. Involving too many people can be overwhelming and appear threatening. If you have siblings, select one — perhaps the oldest, most financially knowledgeable, or one with whom your parent(s) may feel most comfortable — to lead the way. Remember, this is about your parent's money, not about yours or your children's.

Be sensitive. To some extent, our financial lives influence how we view ourselves as independent human beings. For many, old age is a time of coping with a series of physical and emotional losses: hearing, eyesight, mobility, memory, as well as friendships. With any conversation about money, be sensitive to the fears and concerns your parents may harbor about their possible loss of control or independence.

Break the ice skillfully. A subtle opening could involve an anecdotal story about a person you know in common, a news article found in the daily paper, or even about yourself.

Start slowly. Don't commence a dialogue during a crisis situation or try to resolve all details in one meeting. Raise questions that your parents can consider for a follow-up conversation.

I'll stop by for coffee next week, and we can continue our talk. Maybe you'll have those papers by then?

Your parents may actually enjoy the attention. After several informal conversations, you may want to consider the help of a financial professional. For more information, contact the National Council on Aging (www.ncoa.org) and AARP (www.aarp.org).

Seema Ramroop, financial advisor, Morgan Stanley Smith Barney, can be reached at [email protected] or call (727) 773-4629.

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