Contact Us:

Tax Planning: Investment Advice for Tax Returns in PA

Safe Harbor

Individuals are subject to an underpayment penalty unless total withholding and estimated payments equal the smaller of:

90% of the total tax shown on their current year return, or
100% of the total tax shown on their prior year return (110% if taxpayer's prior year AGI was over $150,000/$75,000 MFS).

Underpayment penalty does not apply if:

Total tax due after subtracting withholding is less than $1,000.
Taxpayer was U.S. citizen or resident, and had no tax liability on prior year return that covered 12 months.

To avoid the underpayment penalty, estimates must be made in four equal timely installments.

20102011

1st Installment:
2nd Installment:
3rd Installment:
4th Installment:

April 15 (2010)
June 15 (2010)
September 15 (2010)
January 18 (2011)

April 15 (2011)
June 15 (2011)
September 15 (2011)
January 17 (2012)

< back to top

Tax Return Information

1099 DIV
Custodians such as Charles Schwab and SEI Trust (along with other custodians you may have) are required to distribute to you (by the end of January of a given tax year) the necessary 1099-DIV tax information you will need for filing that year’s tax return. This tax information will include dividends and interest generated from the institutional funds within the portfolios. WARNING! 1099-DIV statements are sometimes incorrect with revisions coming as late as the third week of February (not the custodian's fault). For this reason, it is advisable not to file your tax return early.

1099-R
Retirees taking distributions from their IRA accounts will receive a 1099-R statement, which shows the amounts withdrawn during the year.

1099-B
The 1099-B serves as a transaction disclosure statement. Amounts listed on this report are not necessarily taxable. These amounts are gross transaction listings that match up against the Schedule D (Gain/Loss Schedule).

Schedule D
The Schedule D lists gain/loss figures (if any) from sale transactions for taxable accounts only in a given tax year. Transactions effected in your IRA accounts are not reportable and therefore are not documented on either the 1099-B or Schedule D.

For SEI clients, gain/loss information will be included in your annual tax letter provided directly from SEI Trust Co. For Schwab clients, the gain/loss information will be listed on your Schedule D worksheet (mailed in a separate envelope by CPAG). Both reports will be mailed by the end of January.

IMPORTANT
Please be sure to give the Schedule D and 1099 reports to your tax preparer. They are extremely important for the accurate income tax reporting of your capital gains on all transactions created by CPAG during the tax year.

< back to top

Some Facts About the Roth IRA

Contributions are not tax deductible, but withdrawals are not taxed.
$5,000 may be contributed (minus any contributions made to a regular IRA) in 2010 and contributions are made with after-tax dollars; however, there are phase-out rules based on your modified AGI. Individuals who have attained the age of 50 before the close of the taxable year can make an additional $1,000 contribution. Beginning in 2011, the contribution limits for Roth IRAs will be indexed for inflation.
Contributions and account earnings may be pulled out at any time, tax-free as long as certain withdrawals rules are followed.
Depending upon AGI, contributions may be made even if your employer offers a qualified retirement plan.
You are not required to start withdrawing funds at age 70 1/2; therefore, earnings can be sheltered in the Roth until death.

< back to top

Capital Gains/Losses Netting

How Capital Gains and Losses are Netted for Individual Taxpayers

Step 1: Subtract short-term capital losses from short-term capital gains
Step 2: Subtract collectibles losses from collectibles gains (Maximum tax rate: 28%)
Step 3: Add all gains from the sale of real estate attributable to unrecaptured depreciation
Step 4: Subtract long-term capital losses from long-term capital gains
Step 5: If all categories have gains no additional netting allowed; each category is taxed at its applicable rate
Step 6: If net short-term capital loss then additional netting allowed as follows:

Subtract net short-term capital loss from net collectibles gains
Subtract net short-term capital loss from unrecaptured depreciation gains
Subtract net short-term capital loss from net long-term gains
Subtract net short-term capital loss from ordinary income up to $3,000
Any remaining net short-term capital loss is carried over to future years as a
short-term capital loss with no expiration

Step 7: If net long-term collectibles loss then additional netting allowed as follows:

Subtract net long-term collectibles loss from unrecaptured depreciation gains
Subtract net long-term collectibles loss from net long-term gains
Subtract net long-term collectibles loss from net short-term capital gains
Subtract net long-term collectibles loss from ordinary income up to $3,000
Any remaining net long-term collectibles loss is carried over to future years as a long-term collectibles loss with no expiration

Step 8: If net long-term capital loss then additional netting allowed as follows:

Subtract net long-term capital loss from net collectibles gains
Subtract net long-term capital loss from unrecaptured depreciation gains
Subtract net long-term capital loss from net short-term capital gains
Subtract net long-term capital loss from ordinary income up to $3,000
Any remaining net long-term capital loss is carried over to future years as a long-term capital loss with no expiration.

$3,000 deduction is the maximum allowed per year for all categories combined

Glossary
Short-term: Sale of asset held for 12 months or less
Collectibles: include works of art, rugs, antiques, stamps or coins, precious stones and metals, and alcoholic beverages
Long-term: Sale of asset held for more than 12 months

< back to top

Tax Tips

< back to top

< back to services