BG: Tax Attorney at Law

[Khamsin]

It's getting close to the 15th, and you know what that means! Personally, I did my taxes months ago, but figured I'd make this thread as a thinly veiled attempt to ask my own question before opening up to the rest of your problems.

Since we have BG doctors, lawyers, engineers, and everything else... why not BG tax attorneys?

Me first: My company changed 401k providers shortly after I joined, and as a result I have about $2000 sitting in my old 401k account while the rest of it in the years since then is in the new account. I could just roll it over tax-free into my new 401k account, but... I'm wondering if there's a way to put it toward my home loan principal without paying the tax penalty for early withdrawal. Or is rolling it into the new 401k the only possible action that does not result in penalties? Anybody on BG know the answer?

[Norelco]

It's getting close to the 15th, and you know what that means! Personally, I did my taxes months ago, but figured I'd make this thread as a thinly veiled attempt to ask my own question before opening up to the rest of your problems.

Since we have BG doctors, lawyers, engineers, and everything else... why not BG tax attorneys?

Me first: My company changed 401k providers shortly after I joined, and as a result I have about $2000 sitting in my old 401k account while the rest of it in the years since then is in the new account. I could just roll it over tax-free into my new 401k account, but... I'm wondering if there's a way to put it toward my home loan principal without paying the tax penalty for early withdrawal. Or is rolling it into the new 401k the only possible action that does not result in penalties? Anybody on BG know the answer?

You may be able to get around the penalty if this is your first home.

[Tyche]

One of my accountants is a CPA, let me call the accounting office really quick and I'll edit (if she's here).

[Khamsin]

It is my first home, an FHA 30-year fixed loan.

[Tyche]

There is apparently a provision that allows you to borrow against your 401k for your first home without penalty. She strongly suggested against it, she said if you were to quit your job, then the money you borrowed against your 401k would immediatly be due upon your quitting in the full amount. She also said that each company that handles 401k has their own quirky little rules that may change it up a bit. Check with them.

[Khamsin]

There is apparently a provision that allows you to borrow against your 401k for your first home without penalty. She strongly suggested against it, she said if you were to quit your job, then the money you borrowed against your 401k would immediatly be due upon your quitting in the full amount. She also said that each company that handles 401k has their own quirky little rules that may change it up a bit. Check with them.

Well, no, I don't want to borrow against it. I want to take money out of it that I already have, and pay some of the principal off with it. Basically, take $2000 out of my 401k and make an extra payment on principal without paying taxes on that $2000. What would I "owe" if I quit, in that case? Give myself $2000 back?

Now, if there is a way to pay principal on a home loan out of my 401k without penalty, I could then bump up my contribution to it's max amount and take the excess amount at the end of the year and make extra payments on my principal, all without paying taxes on that amount and without sacrificing the 401k money I would have had if I left my contribution rate where it's at (since I'd only be taking the excess due to my higher contribution rate, not all of it).

[Tyche]

The way I understand is you borrow against it only to eventually put it back into your 401k plan, I don't know if it's an interest free loan or what. So yeah, your giving yourself (your investment brokerage) the $2000 and you again cannot touch it until retirement without penalty. I don't know, that's just the way I understood it. She didn't say there was a way to simply take it out of 401k and keep it for a home loan principle, not to say it isn't possible, she just wasn't aware of it.

[Tricen]

How does this 600$ refund work? My dad does my shit for me, do I get it if I live with my parents?`

[Tyche]

You do if you worked and filled out a tax form. If your tax liability was between $300 and $600, you get that amount back. If it was less than $300, you get $300 back. If it was more than $600, you get $600 back. I guess it may depend on if your parents claimed you as a dependant as well? Do you know if they did (just because you live with them doesn't automatically mean they can claim you).

[Khamsin]

You do if you worked and filled out a tax form. If your tax liability was between $300 and $600, you get that amount back. If it was less than $300, you get $300 back. If it was more than $600, you get $600 back. I guess it may depend on if your parents claimed you as a dependant as well? Do you know if they did (just because you live with them doesn't automatically mean they can claim you).

Will the $600 be deducted from your 2008 return (as an "advance"), or is it free money?

As for the 401k issue, I might just roll it into my new 401k anyway, since the returns on that are higher than my home loan interest rate.

[Tyche]

Gotta factor in if your home is appreciating in value as well (though I'm assuming it isn't in this market heh). As far as the tax rebate, I don't think it's an advance, but no fucking clue if it has to be factored on your 2008 tax forms as money recieved (I would assume not since it is a "tax rebate" as in the money has already been taxed once). But who knows, I don't know a whole lot about it.

[killerx]

Im not aware that any one really has a strait answer to that. I've heard both things, it will hurt us next year or it wont.

[layoneil]

Will the $600 be deducted from your 2008 return (as an "advance"), or is it free money?

it's independent of your 2008 return.

[Dolmen]

it's independent of your 2008 return.

There is still a lot of muddled language regarding this. The IRS and Department of the Treasury have published that the "rebate" of sorts will and will not be an advance on your 2008 tax return refund (they nonstop flip-flop). This rebate is supposed to be mailed in May, but many sources at the IRS are saying it won't happen until July. We'll see if it happens or not.

Regardless, once money is put into your 401(k) the only ways you can take it out without penalty are:
•Age 65
•Borrow against it, and you have to pay yourself interest. This is in some cases a good thing depending on current interest rates.

You can pull money out of an IRA without penalty when you are a first time home buyer, however I have found no information that allows a 401(k) to do this.

My source for this is I am an accountant, and I work in a CPA firm (ran this question by the partners).

[Dolmen]

it doesn't go against next years taxes, from what i understand. and holy crap, $600 would be nice to get back. I was under the assumption i'd get $300 because I didn't make much last year.
:nikkei:

It goes like this:

If you made $18,000 and your Federal tax was $800, you get $600 back. If you made $5,000 and your Federal tax was $304, you get $304 back. If you file Single, and made $80,000, then:
IRS>> lol, we're giving money to the wrong people, you get nothing.

Income limits are Single - $75,000, Married - $150,000. There is a little bit of range after both figures where the $600 tapers off, so $75,867 for a Single filing status would get money, but not the full $600. If you have children, you get $300/child, maximum of 2 children. So the most anyone can get back would be a Married filing status couple with 2+ children, receiving $1,800.

[Grievear]

If you're a dependent of someone else (i.e. Your parents pay for all your shit) you will not get the extra $600.

[Khamsin]

it's independent of your 2008 return.

There is still a lot of muddled language regarding this. The IRS and Department of the Treasury have published that the "rebate" of sorts will and will not be an advance on your 2008 tax return refund (they nonstop flip-flop). This rebate is supposed to be mailed in May, but many sources at the IRS are saying it won't happen until July. We'll see if it happens or not.

Regardless, once money is put into your 401(k) the only ways you can take it out without penalty are:
•Age 65
•Borrow against it, and you have to pay yourself interest. This is in some cases a good thing depending on current interest rates.

You can pull money out of an IRA without penalty when you are a first time home buyer, however I have found no information that allows a 401(k) to do this.

My source for this is I am an accountant, and I work in a CPA firm (ran this question by the partners).

Can 401(k) money be rolled into an IRA without penalty? Then from there, to pay off principal?

Although, someone else advised that it's probably a better idea just to keep it in the 401(k) with higher returns that outweigh the fixed interest rate I have on my home.

On another note, I essentially have two options regarding my 401(k), home loan, and future disposable income: I can either make extra payments on principal with my disposable income, or I can increase my 401(k) contribution percentage. Which one of those is the better option is the question, and seems to be the 401(k) since my home loan interest is only 6%.

[Olo401]

You do if you worked and filled out a tax form. If your tax liability was between $300 and $600, you get that amount back. If it was less than $300, you get $300 back. If it was more than $600, you get $600 back. I guess it may depend on if your parents claimed you as a dependant as well? Do you know if they did (just because you live with them doesn't automatically mean they can claim you).

Will the $600 be deducted from your 2008 return (as an "advance"), or is it free money?

It is an additional rebate to this year's tax return. It's not free money, it's a bonus. You get it even if you owe taxes on this year's return.

Also, for those who plan to file a joint return, you would receive a joint $1200 rebate instead of two separate $600 ones, plus the previously noted extra rebate for having dependent children.

[Khamsin]

there was a great artic le, including when the checks would be mailed, earlier. Mine's one of the first to be mailed, FUCK ING YEAAAAH.

and i got back almost $1k, so i'd get the full $600.

http://finance.yahoo.com/taxes/article/ ... e-It's-Cut

http://finance.yahoo.com/taxes/article/ ... zWGs9W0tIF

^ tells you when. i fall into the 10-18 mailed category. G L E E.

I'm in the mid-range for my SSN, so I'll get it by May 9. I got back $3000, so I should get the full $600, too.

[Tyche]

You have to look at your liability, not how much you got bac. Ask yourself how much in total taxes you got back.

Let's say you paid in 3000 to federal
We'll say you got back a $2600 return

Your tax liability is $400, and you'd get $400 back.

I got back over $5000 from federal, but I had soooo many fucking deductions, my tax liability was nothing. So i get back the minimum $300 plus my 300 for the baby..