Tax Advice

We're only two weeks into December and I've already been approached by more than a dozen charities asking for donations. In a tough economy, those organizations have gotten pretty creative. I'm rarely asked to make a gift of straight cash -- or cash equivalent, such as checks or credit cards. Instead, I've been asked to donate items for silent auctions, buy baked goods and candles at a premium and, of course, take a chance with raffles.

While all these fundraising ideas certainly have their place (and I, by no means would want to discourage you from participation), as a tax attorney, I still believe that cash is king when it comes to charitable donations.

Here are seven reasons to consider why making a donation of cash (or cash equivalent) makes better financial sense:

Most of us are going to retire with less money than we might have hoped and significantly less than we're living on now.

Making that switch takes some adjustment, no matter how much you were making before you retired. U.S. News & World Report identified seven costs it suggested eliminating before you hang up your work boots. The seven are: mortgage, credit card debt, second car, home repairs, expensive investments, unnecessary utilities and taxes you can avoid.

After a year's reprieve, if you are more than 70 1/2 in 2010, you have to ante up a required minimum distribution (RMD) from your IRA, 401(k) or 403(b) and pay Uncle Sam his due.You'll also owe an RMD if you inherited a taxable IRA, no matter what your age.

Last year, because even Uncle realized we were all in dire financial straights, we got a break, but not this year. Anybody born before July 1, 1939, with a tax-advantaged retirement account must withdraw the amount equal to the total balance of your retirement accounts as of Dec. 31, 2009, divided by the distribution period of your life expectancy. You must figure out what the IRS considers your life expectancy by using these tables.

With so many changes in healthcare and taxes these days, it's prudent to plan ahead and talk to as many experts as you can before bills come due. WalletPop experts are on hand to help. Here, they tackle questions on shopping for a new medical plan and finding the right accountant.

Taxpayers using the federal government's e-file system can get their cash refunds within 10 days, or nearly as quickly as the short-term loans offered by some tax preparers that cost up to 25 percent of the proceeds. So take that, H&R Block and Jackson Hewitt!

Anyone with an adjusted gross income of $57,000 or less can use the FREE online tax preparation site maintained by the Internal Revenue Service. That's about 70 percent of all U.S. filers, according to the IRS.

The agency can process a return and issue a refund within 10 days, Commissioner Doug Shulman says. That's down from as long as 8 weeks in prior years.

"Refund Anticipation Loans are often targeted at lower-income taxpayers," Shulman said. "With e-file and direct deposit, these taxpayers now have other ways to quickly access their cash."

So next time tax season rolls around, use the IRS website to file and get some cold, hard cash delivered quickly to your bank account without paying high fees for a short-term loan.

It's eight months before tax season, but our experts are already on hand to tackle your personal finance questions. Leave a comment down below and we'll get on it. Here, the experts help readers with questions about changing careers, taxes and health care.

Question: I am weighing a career change into nursing and will need to apply for financial assistance, as I have been unemployed for the past year. Given what nurses make the first few years, how much of a debt load can I afford to take on? I do not have any outstanding debt and have very little in savings. Besides student loans, what other kind of financial assistance could a nursing student get?
--Thien, New York City

Answer from David Alexander, president of Soliant Health, a health care staffing agency: Financial issues are very important to weigh when deciding on a career change. Given that you don't have debt now, and a nurse makes about $50,000 in the first year, you want to be careful to take on just enough to get your degree. As with anything, it pays to check out a variety of schools to see what best suits your needs. Different schools have different tuition rates and many, especially in the medical field, get more than their fair share of scholarship money because health care institutions tend to be notable charitable recipients. Check in directly with the dean's office at each school to dig further into financial aid and scholarships.

In less than six months, taxes for many Americans are going up. Tax cuts originally signed into law by former President Bush are set to expire at the end of 2010 unless Congress makes a change in the Tax Code. Unfortunately for taxpayers, 2010 is also a significant election year, which, if history has taught us anything, means that Congress is unlikely to do much at all. If the law stays the same, on January 1, 2011, you can expect that the highest federal income tax rate for individuals will increase to 39.6% from 35%; capital gains tax rates will rise to 20% and dividends will lose their tax favorable status and retreat back to ordinary income status.

Even worse, state and local governments are struggling to make budgets balance. A whopping 45 states reported receiving less revenue in 2009 than in 2008, a trend that states can't sustain in 2010. Last year, at least 10 states considered major tax increases and others sought to increase or expand the tax base by hiking sales taxes or imposing excise taxes on such items as cigarettes and soda.

How can you avoid extra hits to your wallet in 2011? Here are five tips to consider:

Unsure if you should co-sign a deed? Trying to understand how the new health care law will affect prescription drugs? Uncertain if you should start a 529 college-savings plan now that you have a child? WalletPop experts tackle these questions and give it to you straight.

Question:

The Dow is hovering in the 11,000s, and consumer confidence was up in March. Still, experts say the economy remains a mixed bag of good news, bad news. Daily bankruptcy filings in March, for example, totaled nearly 6,890, an 11.6% increase from February, according to Credit Slips. And who can forget the high unemployment rate?

WalletPop experts respond to your burning questions about bankruptcy, inheritance and IRA conversions.

Question:
It will be five years in December that we filed for Chapter 13 bankruptcy from a lawsuit. When will our credit rating be cleaned out, so we can fill out Visa card applications without explaining that we did file for bankruptcy?
-- Kevin