Answers to Questions we hear Now and Again.

By when do I owe the balance of tax due for my personal return?

A common misconception is that if you extend your personal tax return past April 15, that you do not have to pay the balance of tax due as well until the extended due date.  However, if you owe tax with your return, you must pay the balance due with the extension on or before April 15.  If you do not pay the balance due, you can be subject to interest and penalty charges.

What are the 2004 annual gift tax exclusion and lifetime estate tax amount?

Federal gift tax annual exclusion           $11,000 per donee

Federal lifetime estate tax exemption    $1,500,000 per decedent

What is the difference between a Traditional IRA and a Roth IRA?

The Roth IRA has “income phaseout limits”.  Individuals and joint filers that make above a certain amount begin to be limited as to the total contribution they can make that year.  Contributions to a Roth IRA are never deductible.  However, the money can be withdrawn completely tax-free is you comply with the “qualifying distribution rules”.  For Traditional IRAs, contributions are deductible depending on your income level.  This can vary from year to year, depending on your annual salary.  The annual contribution to an IRA (Traditional or Roth) is $3,000 per year ($3,500 if over age 50).  This will not change depending on which type of IRA you have.

How long should I keep tax records?

Tax records should be kept for at least seven years.  Certain documentation should be kept permanently.  Some of these documents include: canceled checks, capital stock and bond records, contracts and leases in effect, deeds, mortgages, and bills of sale, inherited property records and valuations, insurance records, and property appraisals.