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THEPRESS.NET

FEBRUARY 18, 2011

MONEY MATTER$

Keep feathering that 401(k) nest SAMIE HARTLEY

the recent economic recession hit America,

there was little fear that a tsunami was headed toward shore. The waves appeared to be part of the natural ebb and flow of the financial tides. But when the economy took a dive, many Americans resurfaced to find their investments had been swept out to sea. But rather than drift on the warmer, incoming tides of the rebuilding economy, financial advisors are urging Americans to dip their toes in the water and consider reentering the fray by renewing their financial investments, which includes revamping 401(k) portfolios. A 401(k) is an investment plan in which an employer helps employees save for retirement. Employees defer a portion of each paycheck to a 401(k) account and the money rests in that account, building interest. Many employers match

a percentage of the deferred funds, providing 401(k) participants essentially free money simply for participating in the program. According to Kiplinger’s Personal Finance, more than 40 percent of the American workforce watched 401(k) investments decline by 30 percent in 2008. But rather than downplaying the value of stocks, mutual funds and bonds, advisors are encouraging people to continue investing in their 401(k) plans. However, since many Americans are beginning – or re-beginning – their retirement plans from scratch, they need to take a new look at their investment strategy. David Roche, brand manager for Apex Securities and Assets Management in Brentwood, believes that since no two

investors are alike, it’s important to make choices that are right for you. “At Apex Securities, we advise clients to continue looking forward,” said Roche. “Your investment choices shouldn’t be reactive to what happened last year. Just because gold did well last year doesn’t mean it will uphold that trend this year.” Since clients set personal retirement goals, Roche and business partner Treva Black recommend meeting with a financial advisor to discuss the most responsible route to take to achieve those goals. While there are hundreds of investment options for a 401(k), how the retirement funds will be spent is what truly matters. According to Steve Vernon, FSA and blogger for MoneyWatch.com,

a 401(k) should be treated like a retirement paycheck generator. Each month you should take out a regular predetermined “paycheck” from your retirement fund to pay for expenses. “Most of us live paycheck to paycheck while we’re working, so let’s not change this financial discipline after we retire,” Vernon said. Many recently-retired Americans assume their nest eggs will be all they need to live out the rest of their lives, but after you travel the world, refurbish your house and buy a motorcycle or two, you’ll have only so much left, so you need to plan your retirement investments wisely to meet your desired retirement lifestyle. And one way to enhance your 401(k) is to work longer. It’s not what you want to hear, but if you work a few extra years than you originally planned, more money will accrue in your 401(k) account. The important thing now is to jump in and get your feet wet. Meet with a financial advisor to help you plan for the retirement you want. Whether retirement is 10 or 50 years away, it’s never too early to start investing into your future, and a 401(k) plan is one of the best ways to keep you afloat. To comment, visit www.thepress.net.

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FEBRUARY 18, 2011

MONEY MATTER$

THEPRESS.NET

Tax time: closer than you think Protect your family. Prepare for their future.

RUTH ROBERTS

A

pril 15 looms on the horizon. There’s no denying that the tax man cometh. But

with a little simple planning and a few sharpened pencils, filers this year can minimize the pain and maximize their profits when Uncle Sam comes calling. Tax codes “There are several changes in the tax codes for 2010,” said Pat Reagan, coowner of Reagan Management Services

in Brentwood. “The majority of taxpayers should be aware of these before filing their taxes.” Some of the changes include standard deduction rates and inflation adjustments for itemized deductions, the standard mileage rate for business use, per diem rates, student loan interest, standard deductions, depreciation and amortization, earned income credits and the income levels for which one must file a return. But one of the most significant changes this year comes with the American Opportunity Tax Credit. Renamed from see Tax time page 4B

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I Can Handle This On My Own Foreclosure Sales and Short Sales by Joan Grimes, Esq. When a person is behind on a home loan, it is very common to think a foreclosure or short sale will allow them to focus on other debts and thereby avoid a bankruptcy filing. However, all too often, a foreclosure or short sale is still followed by a bankruptcy because there is either another loan on the property which starts collecting on its loan or there are taxes as a result of the foreclosure sale which the borrower was unaware. In many cases, a bankruptcy filing prior to the foreclosure or short sale would have discharged the liability on any additional loans on the property, avoided the tax liability completely and allowed the person to stay in the property several additional months. Additionally, a foreclosure or short sale prior to a bankruptcy filing may cause a person not to qualify for a Chapter 7 bankruptcy leaving a person in a Chapter 13 bankruptcy for 3-5 years. What should a person consider prior to allowing a property to be sold at a foreclosure sale? First, prior to allowing a property to be sold through a foreclosure or short sale, (1) determine the affect of the foreclosure or short sale on your credit, (2) is there any personal liability after the foreclosure or short sale which could be discharged in a bankruptcy filing and (3) is there any tax liability which could be discharged through a bankruptcy filing prior to the foreclosure or short sale. Second, could a Chapter 13 bankruptcy filing avoid a junior lien on your principal residence which would have allowed you to retain the real property? Under the Bankruptcy law, a junior lien on a person’s principal residence which does not attach to equity in the real property, can be avoid through a Chapter 13 Plan. For example, if the current fair market value of a principal residence is $250,000 and the balance on the first deed of trust is $300,000, then a junior lien could be avoided through the Chapter 13 Plan. A Chapter 13

FEBRUARY 18, 2011

MONEY MATTER$

THEPRESS.NET

also allows a person to cure a default on a home loan over time which may be all that is necessary to avoid a foreclosure sale. Third, are there any other reasons that a bankruptcy filing may be appropriate prior to a foreclosure sale. The most common reason is that there is significant unsecured debt which can be discharged in the bankruptcy and a bankruptcy filing prior to a foreclosure sale will allow a person to file a Chapter 7 instead of being required to enter into a Chapter 13 repayment plan. In addition, a bankruptcy filing will allow a person to remain in the property additional time. In conclusion, a foreclosure or short sale of real property without a bankruptcy filing may be the right decision. However, a foreclosure or short sale will have serious consequences which should be analyzed by a bankruptcy or real estate attorney prior to the foreclosure sale. This is a complicated area of the law, but a bankruptcy or real estate attorney should be able to make to an analysis of your particular situation fairly quickly. I do free 30 minute consultation in my offices located in Walnut Creek, Antioch and Brentwood. There is no reason to make a wrong decision about a foreclosure or short sale when legal assistance is available. THIS OFFICE IS A DEBT RELIEF AGENCY. WE HELP PEOPLE FILE BANKRUPTCY. THIS INFORMATION IS NOT PROVIDED AS LEGAL ADVICE AND SHOULD NOT BE RELIED UPON IN MAKING ANY DECISION REGARDING A VOLUNTARY DEFAULT, SHORT SALE, FORECLOSURE OR BANKRUPTCY. THIS INFORMATION IS NOT A SUBSTITUTE FOR OBTAINING TAX & LEGAL ADVICE REGARDING AN INDIVIDUAL SITUATION. GRIMESBKLAW.COM © 2010 Joan Grimes – Advertisement

the already-existing Hope Tax Credit, the American credit can be claimed for tuition and certain fees paid for higher education in 2009 and 2010. The credit is worth up to $2,500 of the cost of qualified tuition and related expenses, and the new credit offers a $700 increase over the previous Hope credit. “This is clearly a benefit to many filers,” said Chris Provencher, owner of Provencher Tax Service in Discovery Bay. “This is for dependents and adults taking qualified classes and courses, and it is for tuition and fees, but not limited to that. It also includes books and supplies. It’s a great thing.” Do it yourself or hire a pro? With the increasing trend toward online filing, you might wonder when it’s appropriate to file your own return or hire a professional to do the work. “From our point of view,” said Reagan, “filing a 1040A or 1040EZ with income from one W2 would probably be OK to file online. However, if there are additional schedules such as A, E or C, and if the taxpayer has a small-business income, owns rentals or purchased or sold a home, they should seek the counsel of a professional tax preparer. The IRS reports that audits are up more than 100 percent since 2001, and many of these are random audits.” Provencher agreed that many taxpayers have jumped onto the e-filing bandwagon, but cautioned that for those with more complicated returns, a knowledgeable professional is the safest way to go. “Each year I would say that about 10 percent of my

clients disappear because they file their own taxes,” said Provencher. “But the following year at least half of them come back, and that’s because the law is not easy to understand and you really have to know what you are doing.” Red flags OK, so you’ve listed every legitimate deduction you can think of and you’ve hired a professional to file your return, but will that guarantee you against a potential IRS audit? Not necessarily. “An accurate tax return can still wave a red flag when a refund is exceptionally high or when certain deductions such as medical, charitable giving or mileage is higher than usual,” said Reagan. “So be careful about documenting the deductions and income that you report.” Keeping good records and receipts is another way to keep the IRS at bay. “Knowing what is deductible and what isn’t is key,” said Provencher. “What will send up a red flag? Anything to do with clubs or social dues; they are not deductible. “I would just tell people to choose your tax professional wisely. There are a lot of folks out there that have hung a shingle but aren’t certified. Take the time and interview a few. It will be worth it.” Provencher Tax Service is located at 5560 Starboard Drive in Discovery Bay. For information, call 925-634-5658. Reagan Tax Management Services is located at 60 Eagle Rock Way, Suite C (behind Vic Stewart’s Steakhouse) in Brentwood. For more information, call 925-240-1242.

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FEBRUARY 18, 2011

MONEY MATTER$

Managing money after the military JASON ALDERMAN

force after a career in the armed forces can be chal-

lenging even during the best of times. But today’s economic uncertainty and high unemployment rates should prompt retiring and discharged military personnel to seek help in developing a game plan and managing their personal finances during the transition to civilian life. The issue has gained increased visibility by the recent creation of the Consumer Financial Protection Bureau’s Office for Service Member Affairs, to be headed up by Holly Patraeus, wife of Gen. David Patraeus and long-time advocate for educating military families on consumer issues. Here are a few resources to help with the important financial and job-transition decisions you may face:

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Cherry’s Tax Facts... By Cherry Comstock

Choosing your Tax Preparer Wisely Choose your “licensed” tax preparer wisely is a bigger decision than it may appear. Taxpayers are legally responsible for what’s on their own tax returns even if prepared by someone else. So, it is important to choose carefully when hiring an individual or firm to prepare personal returns. You should only choose an Enrolled Agent (EA) or CPA, you will find that “licensed” credential tax preparers are professional, honest and provide excellent service to their clients. Here are a few points to keep in mind when someone else prepares your return. A Paid Preparer is required by law to sign the return and fill in the preparer areas of the form. The preparer should also include their appropriate identifying number on the return. Although the Preparer signs the return, you are responsible for the accuracy of every item on your return. In addition, the preparer must give you a copy of the return. • Review the completed return to ensure all tax information, your name, address and Social Security number(s) are correct. Make sure that none of these spaces are left blank. • Review and ensure you understand the entries and are comfortable with the accuracy of the return before you sign. • Never sign a blank return, and never sign in pencil. • A Third Party Authorization Check Box on Form

1040 allows you to designate your Licensed Tax Professional to speak to the IRS concerning your return. Here are some suggestions to consider when hiring a tax professional: • Avoid preparers who claim they can obtain larger refunds than other preparers. If your returns are prepared correctly, every preparer should derive substantially similar numbers. • Beware of a preparer who guarantees results or who bases fees on a percentage of the amount of the refund. A practitioner may not charge a contingent fee (percentage of your refund) for preparing an original tax return. • Choose a preparer you will be able to contact and one who will be responsive to your needs. • Investigate whether the preparer has any questionable history with the IRS Office of Professional Responsibility (OPR) for or the oversight agency in states that license or register tax preparers. Unfortunately, unscrupulous “Unlicensed” tax return preparers do exist and can cause considerable financial and legal problems for their clients. Tax evasion is a crime, punishable by up to five years imprisonment and a $250,000 fine. Remember, no matter who prepares a tax return, the taxpayer is legally responsible for all of the information on that tax return. Don’t hesitate to contact us with any questions – 925-778-0281 or info@jettax.org – Advertisement

Transition Assistance The government provides an intensive three-day Transition Assistance Program (www.taonline.com/tapoffice) for separating or retiring service members and their spouses. Workshop attendees learn about setting career objectives, conducting job searches, current occupational and labor see Military page 7B

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Tax tips for the unemployed

A

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t the end of 2010, 14.5 Even if you were unemployed in 2010, plan on filing your income tax returns.

million people were unemployed and many

more were out of work at one time or another throughout the year. In preparing 2010 tax returns, those who’ve been unemployed should make sure they’re getting every available tax break they deserve and

Photo courtesy of ARA Content

preparing their taxes correctly. “Being out of work is stressful enough. Not knowing if you’re getting all the tax breaks you should, or being concerned you’re going to make mistakes that may cost you, just adds to the stress,” said Gary Lundberg a tax software professional with CompleteTax. CompleteTax is an online tax software program offering free federal tax preparation for those who were unemployed during 2010. He offers these tax tips to help: Understand what your tax responsibilities are The unemployed are still responsible for filing a tax return and paying income taxes. This includes taxes on unemployment benefits or severance benefits. According

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to a nationwide survey conducted by CompleteTax of more than 1,000 taxpayers, many Americans incorrectly believe that being out of work means they’re not required to prepare a tax return or pay taxes. Get all the tax breaks you deserve Being out of work allows you to take advantage of several credits and deductions. For example, certain job-search expenses can be deducted if you’re looking for a job in your current profession. These include travel for job interviews, printing and mailing resumés, and outplacement firm fees. However, the CompleteTax survey found that many taxpayers also incorrectly believe they can deduct haircuts or clothes necessary for job interviews, a home office to use in

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their job search and classes to learn new skills outside their trade. Find affordable tax prep and file soon Those using online tax preparation programs can often prepare and file their tax returns for less than $70. The unemployed can file for considerably less. For example, Lundberg notes, CompleteTax offers free federal tax preparation for those unemployed during 2010: “You want to make sure you know what you can and can’t claim. By using a tax program that includes resources to help you make those decisions, you can be confident you’re completing your taxes accurately and getting the maximum tax refund you deserve.”

stocks rather than the safer-but-lower yield from interest-bearing investments. The recent surge in stock prices, he said, can be partly attributed to QE2. The big thing to worry about, Mitchell said, was the country’s debt. For every dollar the United States spends, it borrows 37.4 cents. Interest now consumes about 6 percent of the budget, and that’s expected to grow to 17 percent by 2020. “I don’t care if you’re a Republican or a Democrat or what industry you’re in,” he said. “In the dark of night, you have to admit that that’s not sustainable.” Although foreign investors are currently buying up U.S. debt, it won’t last forever. As happened in Greece, which was forced last year to get massive international assistance to stave off complete collapse, foreign investors will eventually lose interest in buying U.S. debt. “If we want to see how long it will last,” Mitchell said, “we can check with the Greeks.” Another sobering fact can be gleaned from history. International economists Carmen and Vincent Reinhardt recently conducted a study of 15 economic crises around the world over the last 20 years that showed it could take the United States another six years to completely shake off the recession. To comment, visit www.thepress.net.


FEBRUARY 18, 2011

MONEY MATTER$

Military from page 5B market conditions, resumé preparation and interviewing techniques. The Department of Veterans Affairs’ VetSuccess Program (www.vetsuccess.gov) provides additional assistance to military personnel released because of service-connected disabilities. For those whose disability is so severe they cannot immediately consider work, VetSuccess offers services to improve their ability to live as independently as possible. Finding a job Although expertise acquired during military service often translates readily into marketable civilian job skills, it sometimes takes extra effort to make those links more apparent. Consider these tactics: ♦ Begin your research well before you leave the military – a year or more, ideally. ♦ Contact organizations that link job seekers with military-friendly employers such as Hire a Hero (www.hireahero.org), Military Exits (www. militaryexits.com), Helmets to Hardhats (www. helmetstohardhats.com) and Vetjobs.com (www.vetjobs.com). ♦ Make your resumé civilian-friendly – watch out for military jargon that might be hard to understand. ♦ Become acquainted with and post your resumé on popular online job sites such as Monster.com (www.monster.com), Careerbuilder. com (www.careerbuilder.com) and USAJOBS. com, the government’s official job site (www. usajobs.com). ♦ Many service members have one government-provided relocation left when they leave the service, so if a potential job entails a move

and you’re flexible about where to live, use that free relocation to your competitive advantage. Continuing education While investigating career options, learn what required education or certifications you lack so you can begin acquiring those skills now – or at least map out a game plan for how to proceed after you leave the military. The Post 9/11 GI Bill (www.gibill.va.gov) provides financial support for education and housing to military veterans, including undergraduate and graduate degrees and vocational/ technical training. Other VA-sponsored education assistance programs include: ♦ Reserve Educational Assistance Program for reservists called up to active duty. ♦ Survivors and Dependents Assistance for eligible dependents of certain veterans. ♦ VA Work-Study Allowance Program for full- or three-quarter-time students in college degree, vocational or professional programs. One last tip: Money could be tight during your transition, so it’s vital to develop a budget you can live with. Numerous free budgeting tools, including interactive budget calculators, are available online at sites such as the U.S. Financial Literacy and Education Commission’s www.mymoney.gov, the National Foundation for Credit Counseling (www.nfcc.org), www. mint.com, and Practical Money Skills for Life (www.practicalmoneyskills.com), a free personal financial management site run by Visa Inc. Jason Alderman directs Visa’s financial education programs. To participate in the free, online Financial Literacy and Education Summit on April 4, visit www.practicalmoneyskills. com/summit2011.

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