Federal spending cuts may bring changes to military pensions and benefits, including health care, which is nearly free now.
This post is by Susanne M. Schafer of The Associated Press.
Emerging from more than a decade at war, military families are confronting a new worry at home: the prospect that a deal between Congress and the White House over federal spending cuts could chip away at military health insurance, pensions and other services long considered untouchable.
"It's a fear of the unknown, and it's worse when members of your family might be deployed," says military spouse Jeremy Hilton, of Burke, Va., who cares for a disabled child while his wife serves as an active duty Air Force officer. "We are all worried about what will happen. It could cut things my family really relies on."
If Congress and President Barack Obama don't agree on spending cuts by Jan. 1, a package of across-the-board cuts would take effect that would hit the military heavily. If they do agree on steps to ward off those cuts and stop automatic tax increases, it's likely the military will still see reduced spending, but more targeted. The talks about the so-called fiscal cliff are ongoing so the exact cuts are not yet known.
Exactly what proof you need to document and deduct your generosity varies by type of donation. Get the receipts even if you don't plan to itemize.
This post is by Rachel Louise Ensign of The Wall Street Journal.
You typically can deduct charitable gifts if you itemize deductions on your tax return.
But you'll need the proper documentation of your contributions, which differs based on the type of the charitable gift.
If Congress doesn't act on the estate tax, it will revert to pre-2001 rules. That includes sharing a portion with 30 states.
This post is by Ashlea Ebeling of Forbes.
If Congress does nothing, the federal estate tax law reverts to pre-2001 parameters, including an obscure provision known as the state death tax credit that allows states to share in estate tax revenue the Treasury collects. As a result, 30 states would resume collecting estate taxes, boosting their revenue by about $3 billion in 2013, calculates Norton Francis, a senior research associate at the Urban Institute in Back From the Dead: State Estate Taxes After The Fiscal Cliff.
Some states are already counting on the revenue. Gov. Jerry Brown’s multi-year budget estimate for California assumes $45 million of estate tax collections in 2012-2013, $290 million in 2013-2014, $725 million in 2014-2015 and $1.2 billion in 2015-16, says Jason Sisney, a deputy at the nonpartisan Legislative Analyst’s Office, which has warned the state administration not to count on it.
Wealthy wage earners will pay more in Medicare tax next year, as well as higher taxes on investment income. People who tan already pay more.
Starting in 2014, President Barack Obama's health care law will expand coverage to some 30 million uninsured people. At the same time, insurers will no longer be allowed to turn away those in poor health and virtually every American will be required to have health insurance, through an employer, a government program or by buying their own.
For the vast majority of people, the health care law won't mean sending more money to the IRS. But the wealthiest 2% of Americans will take the biggest hit, starting next year.
And roughly 20 million people eventually will benefit from tax credits that start in 2014 to help them pay insurance premiums.
Most plans require employees to use themoney in their flexible spending accounts by the end of the year or forfeit it. The program will change slightly next year.
This post is by Susan Johnston of U.S. News & World Report.
As the year draws to a close, many employees with flexible spending accounts for medical expenses will rush to the doctor or dentist to use up any remaining funds.
For the uninitiated, FSAs allow employees to set aside pretax money to pay for qualified medical expenses, but at the end of the plan year -- or two-and-a-half months into the following year, if the employer offers a grace period for FSAs -- the employee forfeits any money left in the account. However, any money in a health savings account carries over from year to year.
"Typically, what people are going to do is schedule any medical procedures that they can, particularly elective procedures," says Matt Thomas, the president of WorkSmart Systems, a professional employer organization in Indianapolis. "A big one would be things that have to do with vision: if they need to get classes or contacts, or if they're interested in getting a lasik procedure."
If you suffered losses in a hurricane or other disaster that weren't covered by insurance, you may be eligible for a tax deduction. Here's what you need to know.
This post is by Joy Taylor of Kiplinger Personal Finance.
If you suffered property damage from Hurricane Sandy (or Hurricane Isaac or other severe weather), you may qualify for a tax break to offset losses that aren't covered by your insurance.
Losses resulting from disasters such as hurricanes, floods, blizzards, tornadoes and earthquakes (but not accidents or deterioration) are deductible if they are not reimbursed by insurance. However, if the property is insured and you don't file a claim, you can't take a deduction.
Only itemizers can take a tax write-off for damage to nonbusiness property, such as a principal residence or vehicle. And there are a couple of offsets that apply to personal losses. First, you must reduce the amount of the loss by $100. Then, you can deduct the balance only to the extent that it exceeds 10% of your adjusted gross income. For example, if you have $20,000 in unreimbursed casualty losses from Hurricane Sandy and your AGI is $100,000, you would first subtract $100. Then, you would subtract $10,000 (10% of your AGI) from the $19,900 balance. The remaining $9,900 is the amount you can deduct on Schedule A of your tax return. Use IRS Form 4684 to report your casualty losses, and then carry the amount over to Schedule A.
Just who and what will fall by the Dec. 31 deadline? We'll likely keep hanging on by our fingernails until Congress makes some difficult decisions about tax policy.
Is the world going to end on Dec. 31? It would seem so judging by the heat generated by Washington’s wrangling over the budget. Here’s a Wall Street Journal guide to common questions about the “fiscal cliff” facing the U.S. economy.
What is the fiscal cliff?
The fiscal cliff is the phrase that has become associated with the combination of $500 billion in spending cuts and tax increases that are scheduled to automatically start at the beginning of 2013.
Why are we facing a cliff at all?
Think of the past two years as a rolling series of arguments about taxes and spending, none of which have been brought to a satisfactory conclusion. One of the fiercest standoffs happened in summer 2011 over whether and how to raise the U.S.'s borrowing limit.
Most records can be safely discarded after three years, but you'll want to keep some types of paperwork longer. Yes, you can keep those files electronically.
This post is by Kelly Phillips Erb at Forbes.com.
You’d think that the week after Tax Day would be quiet, but it’s not. Once tax time has come and gone, taxpayers are not completely off the hook. You’ll want to keep records and documentation on hand in the event that the IRS comes calling.
Here are some tips to help you figure out which records to keep and how long to keep them:
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