- No return needs to be filed for my daughter's UTMA accounts. My in-laws and we have set up custodial accounts for our daughter. Having heard about the "kiddie tax," I thought that I would need to include her income in our tax return, using form 8814 or form 8615, or, even worse, file a tax return for her. However, I learned as long as her unearned income is below $850 and she has no earned income, no return need to be filed.
- No self employment tax needs to be paid on income below $400. According to Schedule SE, no filing needs to be done for self employment income under $400. While this was not a concern for 2006, it will be good information to know for the 2007 tax year.
- Sometimes tax rates are reduced. When I calculated our estimated 2006 state tax, I assumed the same tax rates as 2005. According to the estimate, we owed money, which I sent in. However, the tax rates were reduced for 2006, and now we are getting a refund. Although this is probably the last time rates will decrease, I will check our state tax rate for estimates in the future.
Now I have confessed to my misdeeds, I will be taking steps to be better on filing my taxes for 2007. Here's what I am doing:
- Taking the H&R Block Basic Tax course. Now that I am retired in my forties, I have time for extracurricular activities like this one. If I pass the final exam with 80% or better, I will qualify to be a seasonal tax preparer for 2007 taxes. At the very least, I will be better prepared to do my 2007 taxes:-)
- Do my initial 2007 tax estimate in December 2007. Since I retired in October, 2007, my W-2 income will be finalized in at the end of October, 2007. While I will have some additional interest and capital gains income, it will be small compared to me income. I should be ready to final in January, 2008:-)
We'll see if these interventions will make a difference for the 2007 tax return:-)
For more on New Beginnings, check back every Sunday for the segment.
This is not financial or tax advice. Please consult a professional advisor.
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