Straight Talk Tips
Aging Parent Deductions
If you provide more than half of an aging parent's support, you may be able to declare your parent a dependent even if he or she is not living in your home. In addition to getting the dependent deduction, you may also be able to take a tax deduction for your parent's medical expenses. To prove you pay the expenses, pay your parent's bills directly to the provider, rather than giving your parent(s) the money to pay the bill.
Taxpayer's Bill of Rights
Interest on unpaid taxes can be canceled. The 1988 Taxpayer's Bill of Rights Act guarantees you the right to cancel interest assessments under certain circumstances. Three conditions lead to cancellation of interest:
- When the interest is due to an error made by the IRS;
- When the interest is due to a delay caused exclusively by the IRS; or
- When the interest is demanded on money which the IRS send in error.
To cancel interest, write a letter that states, "Interest should be canceled because ..." and list which condition the cancellation of interest meets. Mail your letter to the Service Center that issued the bill.
IRS Publication 590
When it's time to start taking at least minimum distributions from your IRA or qualified pension plans, call 800/TAX-FORM or go to www.irs.gov and get a copy of IRS Publication #590. The table outlines the IRS' life expectancy minimum distribution requirements.
Transferring Brokerage Account
When transferring a brokerage account to a new firm, your former firm is required by the New York Stock Exchange's Rule 413 to transfer your account within five days of your request. If your former firm fails to transfer your account within the allocated time, it can be fined up to $100 per account per day.
Home Mortgage Rates
If you're buying a home and don't have any long-term debt, your lender may offer to let you use more than the "28% of your income" formula to qualify for a bigger mortgage. Stick to no more than (preferably less) 28%. Remember: A bigger mortgage means a bigger payment.
Citi College Card
You want your 18 year old to learn how to handle a credit card responsibly, right? But you don't want this lesson to be learned the hard way by going into big-time debt. Here's one card we like that can help you do that:
It's the Citi Dividend Platinum Select Card for College Students. You set the credit limit (we recommend a maximum of $500) and you can monitor the way your child is using the card through a Web site or toll-free phone number. The card has no annual fee. You can get more information at www.citi.com or by calling (800) 248-4226.
DRIPs Make Good Investments for Children
There are online investment plans that allow you to buy just one stock at a time and reinvest the dividends through a dividend reinvestment plan (DRIP). One we like is www.dripinvestor.com.
This is a great way to make an investment for a child. As Internet-savvy as today's children are, they'll probably want to complete the transaction themselves.
