Tuesday, April 24, 2007

Bigger Cars Are Still Safer

According to recent crash statistics, bigger cars are still safer. According to the Insurance Institute for Highway Safety:

The vehicles with the lowest death rates were the General Motors', Fortune 500) Chevrolet Astro van, the Infiniti G35 sedan, the BMW 7-series sedan and the Audi A4/S4 Quattro. The Astro, a full-sized van, had a death rate of 7 per million. The Audi A4/S4 had 14 deaths per million registered cars.

The vehicles with the highest fatality rates were 2-door, 2-wheel-drive versions of the Chevrolet Blazer small SUV, the Acura RSX small car, the Nissan 350Z sports car, the Kia Spectra compact car, the Pontiac Sunfire compact car and the Kia Rio subcompact car. Death rates for those cars ranged from 232 per million for the Blazer to 175 for the Rio.


Sunday, April 8, 2007

Tax Software Does Not Calculate Tax Liability Correctly For 409A/Code Z Income

It appears that H&R Block TaxCut 2006 does not take into account the 20% additional tax liability as required by federal and state for 409A deferred compensation reported as code z in box 12 of the W-2 (even though there is a code z listed for box 12 in the software): the final tax liability calculated is the same whether you have code z income or not. I called H&R Block and they confirmed this is not updated in the software yet.
Therefore it seems like we have to manually override the program ourselves and enter the additional tax liabilities into the worksheets (which can be accessed directly or interactively through the "other taxes" questionaire) for both federal and state (I heard for the federal part TaxCut actually flags an error for code z during the final check and it will take you to the corresponding worksheet, but you still have to enter the extra tax penalty amount manually. For the state part there is no final check however--since the tax laws governing the tax laws are different for each state). I am not a tax accountant, but it appears that we have to manually add the extra taxes as follows:
  • 20% of the reported as code z in box 12 of the W-2 (plus interest penalties if any) for federal tax. Enter this amount interactively or manually as "NQDC" on the dotted line left of line 63 on 1040.
  • 20% of the reported as code z in box 12 of the W-2 (plus interest penalties if any) for state tax. Enter this amount interactively or manually as "NQDC" on the dotted line left of the corresponding line on the state tax form (for CA 540 it is line 33).
I am not sure whether the same problem exist for Intuit's TurboTax, but according to one of my colleagues it appears to have the same problem.

Traditional to Roth IRA Conversions: No Income Restrictions Starting 2010

Congress passed a new law which allows the conversion of traditional IRAs into Roth IRAs without income restrictions starting in 2010. This presents golden opportunities for people who makes more than the current Roth's modified AGI (MAGI) limits (for singles it is $95000 phasing out at $110000; and for married couples it is $150000 phasing out at $160000): note that AGI is gross income - pre-taxed contributions such as 401k). Although taxes (but not penalties) will be levied on any converted amount, Roth IRAs are better than traditional IRAs in several ways:

  • No tax on gains (whereas gains in traditional IRAs/401ks are subjected to INCOME taxes: this is even worse than long term capital gain/dividend taxes!).
  • Penalty withdrawal of principal after 5 years (whereas withdrawls from traditional IRAs are subjected to various rules and taxes are always calculated using a "proportional" ratio of non-contribution/total)
  • No minimum distribution required at age 70 1/2 (as a matter of fact, you can still contribute then--provided you are still working).

If you cannot contribute to Roth IRAs right now (due to MAGI limitations), then it makes sense now to contribution the maximum to traditional IRAs now and convert them to Roth IRAs in 2010.

Welcome to Philip's Blog Home!

This blog is dedicated to my personal info and expression as well as reviews, opinions, and discussions on various subjects/topics. Most of the time the focus will be on living and finances (such as taxes, investing, trusts, insurance, credit scores/debts/loans/mortgages, real estate, college savings/financial aids, etc.). However, occasionally topics geared toward personal tastes will also be posted. I hope what I posted here will be of help to others.