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How the new tax laws for 2007/08 could affect you.

With tax time for 2006 right around the corner, I thought it might be a good time to revisit an article over at Smart Money that I read in August about all the new tax law changes that go into effect in 2007 and 2008 with Bush’s signing the “Pension Protection Act of 2006”. Since these changes will be affecting a lot of people, I thought I would highlight a few of the changes here and you can check out the rest at the original article.

—Beginning in 2007: More Beneficiaries Can Roll Over Money from Deceased Person’s Retirement Plan
Under the current rules, only an individual who is a deceased person’s surviving spouse can roll over, into his or her own IRA, distributions received as a beneficiary of the deceased person’s qualified retirement plan. Other beneficiaries (such as children and other relatives) can’t take advantage of the tax-smart rollover strategy. But things change. Beginning next year, a nonspousal beneficiary’s IRA will be allowed to receive a tax-free rollover of a qualified distribution from a deceased person’s plan. (cont.)
*I like this one, as sometimes there is not a spouse to be had and it frees up more options for families to keep the money that another family member has worked so hard to save up.

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—Beginning in 2007: Directly Deposit Your Tax Refund Into IRA
Starting with your 2007 Form 1040, you’ll be allowed to directly deposit all or part of your federal income tax refund into your IRA or your spouse’s IRA if you file jointly.
*Brilliant…if you are already using your witholdings as a savings account, now you can put it right into your retirement account come tax refund time.

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—Employers Can Automatically Enroll Workers for 401(k) Contributions
The PPA immediately removes perceived state-law obstacles that discouraged many employers from automatically enrolling their workers for 401(k) salary reduction contributions. Effective for plan years beginning in 2008, the new law also installs auto-enrollment rules that will make it easier for 401(k) plans to pass nondiscrimination tests (intended to prevent contributions from being too heavily skewed in favor of higher-paid employees). (cont.)
*No more exempting people from enrolling just because they didnt ask or they were lower on the totem pole. Great.

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Bigger maximum salary reduction pay-ins for SIMPLE plans. Participants age 50 and older can contribute more.
*Allows people more time to pay catch up towards retirement day!

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—Saver’s tax credit of up to $1,000 for those with modest incomes who contribute to 401(k) plans and IRAs (subject to income-based phaseout ranges that depend on filing status).
*Maybe this could encourage more people to actually contribute to retirement plans, knowing they might get a tax credit of up to $1,000 if they do so? Let’s hope so.

There is so much more in this article, including some of the downsides to the new tax laws that will be in place in 2007 and 2008. Be sure to check out the rest of the article at Smart Money!

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taxes
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Problogger’s 20 best tips for improving your blog.

I know this is not directly related to financial matters, but Darren over at Problogger has a list of 20 ways to help you improve your blog, from making more money with affiliates to solving “posting block”. I read his blog every day, and there is always something new to learn.

If you are looking for that extra spark for your own site, you might want to check out that post, as the tips there are invaluable.

Happy blogging!

blogging
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Buy offers $4.95 2GB USB Thumb Drive – backup financial docs easily.

*Update- Its $9.95 now..but for a 2GB drive, thats still a deal. Personally, I think its the best way to back up stuff and take it with out at all times.

Ending today, over at buy.com, they have a 2GB USB thumb drive for only $4.95. The price is actually $50 with free shipping, but if you pay via Google Checkout the price drops to $30. ($20 discount on purchases $50 and over). Mail-in rebates of $20.05 and $5 cut the total price to $4.95.

And just what does this have to do with money? Well, obviously it saves you money. But, in my house we use these USB drives to store important documents: account numbers, bank names, copies of our drivers licenses and credit cards, insurance policies and any other important financial documents. Each of us has one with all the info on them, and there is even one in our fireproof safe in the house. That way, in case of an emergency, we each have all the financial info we need available right away without having to go dig through files and/or the computer. Trust me, its worth the peace of mind for $4.95.

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shopping
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Thank you Citi for my $100 gas rebate form.

Thanks to reading the post about this over at Blueprint for Financial Prosperity back on Friday November 10th, and thanks to the fact that I have 2 of Citibank’s credit cards, I just received in the mail today my “Mail-In Gasoline Cash Back Certificate”. All I have to do is spend $100 on gas, save the receipts, and send them in before the end of they year to have Citi send me a check for the reimbursement. Of course, there were catches…

I had to sign up for their Credit Protection program, which charges me money each month depending on my balance, in order to protect me if I lost my job or somehow was not able to pay my bill. But I have 2 things going for me….one, I never carry a balance on those cards, ever; and two, I can cancel the plan after I submit my receipts.

Honestly, its hard for me to figure out why they do these promotions, there must be an awful lot of people that forget to cancel the service. Me? I put it on the calendar so I cannot forget.

If you want to try your hand at getting a Cash Back Certificate, Blueprint for Financial Prosperity has the links up on his site, and hopefully they still work.

Good luck, and thank you Citibank!

credit • saving
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Keeping my change with Bank of America

First off, a disclaimer…I dont work for Bank of America. That being said, I think their “Keep the Change” program is an incredible way for the “troubled saver” to actually save some money. I think it was back in November of 2005 when I first heard of this program, and we immediately signed up. How does it work? Well, for every debit card purchase that you make, BofA will round up your purchase to the nearest dollar. So when your bill at 7-11 comes to $4.81, BofA will debit your account for $4.81, and transfer $0.19 to your savings account automatically. This in effect makes your bill at 7-11 $5.00. Now, I realize that $0.19 is not a lot of money, but say you make 3 different purchases on your debit card during the day as follows:

7-11 – $4.81 – $0.19 transferred to savings
Grocery Store – $101.02 – $0.98 transferred to savings
Gas Station – $40.32 – $0.68 transferred to savings

Total savings for that one day would be $1.85. If you did the that same amount of purchases every day, you would be saving $1.85 X 30 days = $55.50 per month, or $666.00 PER YEAR.

This to me seems like a no-brainer. I mean, how much would you really miss $1.85 per day? Ever since we enrolled in it, we have not missed the extra dollar or 2 every day, and its been nice to see the savings account go up without even making an effort. This program is great for people that might have trouble putting aside money every time they get paid.

The added bonus to the Keep the Change program? For the first 3 months, they will match your savings up to $250…and aft r that, they will match 5% of your savings. Free money is ALWAYS the way to go! Its like getting a company match on your 401K, but without having to put the money away yourself..its all automatic, you dont miss the daily withdrawals, and it all ads up in the end.

If you do bank with BofA, please be sure to look into this program. We have socked away hundreds of dollars without any effort, and we just got our first matching funds check for nearly $200 in free money!

banking
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