September 4th, 2010 
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irs income tax return table
What is the best way to reduce taxes through retirement plans?.
I'm trying to find ways to reduce our tax liability as much as possible for next year's return, as my husband found a job after finishing college this year and our combined income should be about $102,000 come next April 15.
I earned about $60,000 last year and as joint filers, we got back $1600 from the IRS for 2007. According to the tax tables, (at our current W-4 exemptions) we should owe IRS about $1200 next year if we don't do anything, so I'm trying to find out which retirement plan we should go with . Roth IRA or regular IRA?
Roth IRA sounds appealing because the contributions are deductible for now, but what about the taxes on the distribution in 25 years when we expect to retire? Is there a whole lot of difference in the amounts between Roth and traditional IRA when we finally get the money at retirement?
Thanks guys.
You've got it backwards. A Roth is NOT deductible now. The benefit of a Roth is that it is TAX FREE upon withdrawal if you are over age 59 1/2 when you retire.
A Traditional IRA will give you tax savings now but it's taxable as ordinary income when you withdraw the funds.
If you're young, a Roth will be the FAR better deal in the long run. If you're nearing retirement and expect your income to drop significantly when you retire, then a Traditional IRA is better for you in most cases.
However with your incomes, IRAs are not the best bet. You can contribute MUCH more income into a 401(k) at your work -- up to $15.5k per year, plus whatever matching contributions your employer's make. If your employers offer 401(k)s then you should contribute at least enough to get the full employer match as that is FREE money once it's vested. That skews the comparison with a Roth IRA because of the extra employer match. The best in the long run would be a Roth 401(k) if your employer offers it. They're pretty new still and many employers don't offer them yet but if it's available then that would be the hands-down long-term winner for you.
Also, you may be limited on the deductibility of an IRA due to your income if your employers offer retirement plans.
Don't let current tax savings cloud your judgment! Consider the tax consequences but choose based on maximizing your wealth, NOT just saving taxes! It's very easy to be "Penny wise & Pound foolish" if you look only at the current tax burden.
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Ron Paul Campaign Sabotage
Taxation of Non-Resident Alien?.
Hey,
I've ask a couple of people about the taxation of non-resident aliens. They all said that on regular income the taxrate will be the same as for a resident alien. But in the Instruction sheet for the Form 1040NR that the IRS provides ( http://www.irs.gov/pub/irs-pdf/i1040nr.pdf ) it has a taxation table at the end and the tax amounts shown there are way higher than what a resident alien would pay. How can that be? It also has an example in there.
Could someone please help me a little bit with filling out the 1040NR. I don't know who to ask for help with the individual fields. All the tax places (H&R Block and so on) have no clue about a non-resident tax return. Also it is hard for me to talk to someone on the phone because of my english. It is easiert to write (emails).
Thank you very much
Jaxx
A Non-Resident Alien will generally pay higher taxes than a resident. The underlying tax rate schedule is the same for NRAs and everyone else, however a NRA cannot claim the Standard Deduction. This is the primary reason for the higher total tax paid by a NRA.
If your only income is from wages, salary, tips, taxable state and local tax refunds or taxable scholarships and fellowship grants you can file Form 1040NR-EZ instead of From 1040-NR. It's considerably simpler to prepare the EZ version if you're eligible to use it.
If you need assistance you can try to locate a local CPA or EA who specializes in NRA issues or visit the local IRS office. You are right that the storefront tax prep mills are clueless on these issues so avoid them at all costs.
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