Wednesday's Tax Tip #17 - Rebate schedule

Here is a schedule of when the government rebate checks will be sent out.

Please note, if you had your 2007 tax refund direct deposited, this rebate will be direct deposited.

Wednesday's Tax Tip #16 - Capital Gains

Often times, taxpayer's are afraid to sell a stock for fear of triggering a capital gain.

In general the tax implication should be one of the last issues you consider when sell a capital stock. As I like to tell my clients, I would much rather have you pay capital gains tax on income than deduct losses.

Here is the decision making rationale I believe the owner's of capital assets should consider.

Can I make more money leaving my investment where it at or is there an investment where it will earn more?

For instance, assume you have a stock that you paid $15,000 for and now it's worth $24,000. you're decision should negate the $9,000 gain to date. The investment question should be, where can I invest that $24,000 where it will earn more? Maybe you decide to keep it where it's at because you like the long term prospects of the industry/company.

Maybe you decide there's a better place to invest that money, in which case you sell. But if you decide to hold on to that stock because you will have to pay $1,350 in capital gains tax, you may find that it costs you more money.

Let's assume that investment, now worth $24,000, drops to $22,000, you have just lost $2000 in real dollars, just because you didn't want to pay the capital gain; and you still have the capital gain tax.

Ideally, you would analyze your investment portfolio continually to maximize your gains. But time makes that impractical.

I would recommend that you corner your broker or account manager on a quarterly basis and review your portfolio and adjust your investments accordingly.

Hopefully, you've got quite a few capital gains, it means you're making money.

Personal financial tip #17 - Getting rich

So you want to get rich?

Just perusing our client base, you will find that there is one common theme among our wealthiest clients. That theme? CONSISTENCY.

Most of our wealthiest clients live in nice but modest homes and rarely moved. Most of them work(ed) steady jobs with little transition. Most had little in terms of marital transition (divorces & marriage). Few waste their money on "toys" such as boats or high end autos.

But all of them did one thing, steadily saved.

In fact, very few of them had/have high paying corporate jobs. You would be surprised at how many of our wealthiest clients are school teachers; a testament to the lack of career transition.

We are all bombarded by messages in our society telling us we can have it all. But I've seen it time and time again that people who chase wealth in a Don Quixote like fashion end up poorer than those who simply have a plan and work the plan, dollar by dollar.

Wednesday's Tax Tip #15

So far this tax season, I've had two clients take distributions from retirement accounts to cover debt issues.

A word for the wise, avoid doing this at all costs.

First, typically when people take money from an retirement account (IRA's, SEP's, SIMPLE's) they will typically have the payor withhold a flat 20% for income tax. This is just an estimate of the tax consequences not the actual tax on the distribution.

For example, if you are in the 15% tax bracket, you will have 15% in income tax plus an additional 10% excise penalty for the withdrawal. You're effectively 5% under withheld on that withdrawal.

In addition, a particularly large distribution may throw you into the 25% tax bracket, thus resulting in 25% federal tax plus the 10% excise penalty.

But we're still not quite finished, you also have state income tax to pay on said withdrawal. In Ohio, I advise clients to factor roughly 5% for state tax (but it can be as high as 6.55%).

Now, you not only have issues around debt but you also have the compounded problem of a tax debt.

So before you yank any funds from a retirement account you should

1) Analyze your personal financial situation. If you are simply prolonging an eventual bankruptcy filing, don't add to it by creating more debt with a big tax bill. In addition, a bankruptcy attorney may be able to keep those assets from being seized.

2) Talk to an accountant about the actual tax impact of such a withdrawal. You may be able to lessen the tax burden with some effective planning.

3) Be ready to pay the additional tax on any distributions.

During my career, I've seen way too many people add to already stressful financial situations with some unwise handling of retirement accounts. Talk to a professional and avoid the same pitfalls.

Personal Financial Tip # 16 - IRS rebate

Normally, I would put information on the upcoming tax rebate on the tax tip page.

However, in the news there has been a reporting of fraud in conjunction with rebate so I would like to address this here.

First, to be eligible for the rebate, you must file a 2007 tax return. The information place on that return will be the information used for the rebate. You do not need to send any additional information to the IRS.

No one from the IRS will contact you or request information from you in an email or phone call.

Second, if you direct deposit an IRS refund check, the rebate check will also be direct deposited. If your refund check was mailed, your rebate check will be mailed.

Third, you are not required to file a return if you owe no taxes. However, you are required to file a return in order to qualify for the rebate.

From the IRS website.

Starting in May, the Treasury will begin sending economic stimulus payments to more than 130 million households. To receive a payment, taxpayers must have a valid Social Security number, $3,000 of income and file a 2007 federal tax return. IRS will take care of the rest. Eligible taxpayers will receive between $300 to $600 if single or $600 to $1,200 if married filing jointly. Millions of retires, disabled veterans and low-wage earners who usually are exempt from filing a tax return must do so this year in order to receive a stimulus payment.

But there are more details to know about. Find out more here and visit this page regularly for the latest updates.

So the bottom line is to file a return and the IRS will take care of the rest. Give no personal information to anyone requesting it.

Business Tip #15 - What's your niche?

I've written about this in the past but it's worth reviewing.

As a business, you need to operationally position yourself as one of three operational niches.

1) Low cost provider

2) Product/Service Innovator

3) High quality product/service provider

Too often, small business owners try to straddle the line between low cost provider and high quality provider. But the two are divergent operational goals.

As a small business owner, you typically do not have the economies of scale to offer the cheapest rates for products and services. In addition, many people are willing to pay a premium for personal service.

What if your just getting going and you find you need to low ball the cost of your product and service to get the work?

Resist the temptation and ask yourself this question. Do I really want these people to be beating me up on price all the time? Because trust me... they will.

Personal Financial Tip # 15 - Telemarketers

If you registered on the National Do Not Call Registry, not that the numbers you put into the system only last for five years.

If you were someone that input that information early on, your five years are just about up.

To continue your block on telemarketers click here.