Personal Finance: Ask the Experts

Get advice on money matters from The Bee's Claudia Buck and a panel of local experts

March 31, 2013
How much of early IRA withdrawal is subject to 10% penalty?

Q: My question has to do with the money I'm using from an IRA for all my closing costs on purchasing my first house. I'm looking to spend about $20,000. By taking money early from an IRA to buy a house, my understanding is that they only waive the 10% tax penalty on the first $10,000. That means anything I use beyond that I pay taxes on, PLUS 10%.
I'm trying to get an idea of whether or not I will owe taxes next year based on this additional taxable income. My income for 2013 will probably be around $72,000, not including the IRA distribution. I think my only credit is the child tax credit and as of 4/11 I claim single and 0. (Prior to this I claimed single and 5. I figure it's wise to pay more taxes this year). I will file as head of household in 2013.
Salem, OR

March 30, 2013
Is a will or living trust necessary if my only asset is my house?

I am a 71-year-old widow. All I have is my house. Do I have to spend a lot of money making a will or a trust? I have two grown children and have said it will be up to them to do what they want with the house. I have called attorneys but they want $700 and up to make out a living trust or will. I cannot afford that amount. What advice can you give me? Thank you very much.
Kathy, Sacramento

March 29, 2013
Should my wife and I convert some of our term life to whole life?

Q: Our financial advisor suggested that my wife and I convert some of our term life to whole life. Should we follow his advice? Here is our information:
Husband - 38 years old
Wife - 32 years old
Combined Adjusted Gross Income - $175,000

Husband - $10,000 annual 401(k) contribution ($5K Roth & $5K traditional)
Wife - $15,000 annual 401(k) contribution ($7.5K Roth & $7.5K traditional)

Husband - $2 million term life policy - 19 years remaining on a 20-year policy
Wife - $2 million term life policy - 19 years remaining on a 20-year policy

We both have a disability income policy. The total combined retirement account value 401(K) is $75,000. The total combined savings and investment account value is $300,000. We have a child (age 1). We do not have any debt. We're currently renting

Walnut Creek, CA

March 28, 2013
Do I have to amend my returns to report income on a late 1099 form?

Q: After receiving what I thought were all of my W-2s, 1099s etc., I filed my 2012 return. I owe on the federal but received a refund from the state. Last week I received a 1099 form from the mortgage company that owns our 2nd mortgage. During the course of the year, we were told that as a "good faith" customer, we would receive a check for $300 for making payments on time. We received a total of $800 from them. Besides being very late, what are the tax consequences of this amount? I see an amended return in my future.
Roseville, CA

March 28, 2013
Free tax help heading into April 15 filing deadline

Want free help getting your taxes filed? As the countdown to the April 15 filing deadline grows shorter, there's no shortage of places where you can get free help preparing your 2012 tax return.

The easiest is by IRS-trained volunteers, who offer free help to seniors and modest-income taxpayers at numerous locations through the Sacramento area. Typically, they're at schools, libraries and community centers. To find a Volunteer Income Tax Assistance (VITA) or Tax Counseling for the Elderly (TCE) site near you, the IRS has easy-to-use search tools that let you find VITA and TCE sites by ZIP code.

March 27, 2013
Online shoppers: BOE says it's time to pay California use tax

If you shop online, chances are you probably don't keep track of whether you paid
sales tax on every purchase.

But the state Board of Equalization is reminding taxpayers: You may owe taxes and there's an easy way to pay up.

Whether it's catalogue clothes, mail-order car parts or eBay purchases, the state requires a "use tax" on purchases from out-of-state sellers who don't charge California sales tax. (What you owe is based on the sales tax rate in effect for where you live.)

And it's supposed to be paid when filing your 2012 income taxes this year. If you don't have receipts, the BOE has a handy Use Tax Lookup table that spells out exactly what you owe, based on income. (The LookUp table applies only to purchases of personal items priced below $1,000 each. For items above $1,000 each, you would need to have a receipt and pay the applicable sales tax.)

March 23, 2013
Didn't file a 2009 tax return? The IRS could have your refund waiting

Didn't file a 2009 tax return? You could be missing out on federal tax refunds of up to $5,657.

The IRS is reminding more than 984,000 U.S. taxpayers who didn't file in 2009 that they could be eligible for tax refunds. In California, there's an estimated 100,700 taxpayers who could be be in line for a median refund of $516, according to IRS estimates.

In some cases, taxpayers didn't file a 2009 return because they didn't owe anything. But thousands could still be eligible for a tax refund, especially if they had minimal income that qualifies them for the federal Earned Income Tax Credit.

There's a three-year window to claim an IRS tax refund, which for 2009 returns will expire this year on Monday, April 15. If you don't file a return by then, the money is gone.

For questions, call the IRS helpline at (800) 829-1040. To locate 2009 tax forms, go to the IRS website's "Forms and Publications" page or call 800-TAX-FORM (800 829-3676).

March 22, 2013
How do I report sale of business assets?

Q: I am a triathlete. My wife & I are partners in a sports promotion LLC here in California. It only grosses about $25,000 a year and has about $12,000 of assets that are fully depreciated. We sold the business in December 2012 for $20,000. The sales price is $10,000 for the equipment & $10,000 for the company's name & reputation, or goodwill.
How do I report the sale? Is it reported on the LLC tax return? Are there any special forms that need to be filed with the CA Secretary of State or is the final 2012 LLC tax return all that needs to be prepared? Any help would be greatly appreciated. thank you.

Fresno, CA

March 21, 2013
Investors warned about 'Profitable Sunrise' online scam

Californians are being warned about an online investment scheme run by "Profitable Sunrise," a company that seeks to lure investor victims through Biblical references.

The California Department of Corporations recently issued a "desist and refrain" order against the company, its parent company, InterReef LTD, and its principals, identified as Roman and Radoslav Novak.

According to the CDC, Profitable Sunrise falsely claims "risk free" investments with returns of up to 3 percent per day.

CDC spokesman Mark Leyes said Profitable Sunrise appears to operate similar to a Ponzi scheme, where new investors' money is used to pay off older investors.

The company advertises a number of investment plans, including short-term "hard money loans" to U.S. and global businesses. But the company is not authorized or licensed to do lending or sell securities in California.

Profitable Sunrise is running "a massive, international scheme that takes advantage of religious affinity to deprive investors of their money," said CDC commissioner Jan Lynn Owen in a statement.

Similar warnings have been issued in other states, including Alabama, Kentucky, Minnesota, New Jersey and North Carolina, as well as countries like New Zealand.

Californians who've invested with Profitable Sunrise are encouraged to file a complaint at or call (866) ASK-CORP.

March 19, 2013
Check 'n Go customers: You may qualify for online loan refunds

Thousands of customers of Check 'n Go, a payday and installment loan lender, are reminded they could be eligible for refunds, according to a $4.3 million settlement with the San Francisco City Attorney's office.

Under terms of the settlement, more than 12,800 Californians who took out Check 'n Go installment loans of $1,500 or less between November 2006 and June 2008 could be eligible for refunds of interest, fees and finance charges, ranging anywhere from $20 to $4,675.

The deadline to apply is March 28.

Check 'n Go, which has more than 12 outlets in the greater Sacramento region, was accused of charging exorbitant interest rates - as much as 400 percent when annualized - on online, short-term installment loans of $1,500 or less.

March 19, 2013
How do we determine the 2002 value of land for tax purposes?

Q: We share ownership of 170 vacant, unimproved acres (3/4 mile on the beach), with ownership split 40 ways within our extended family. In 2012, the parcel was sold to to a land conservancy. Our portion is about 1.2 percent and was given to us in 2002 by a father. How do we determine the 2002 value of property for income tax purposes? No Realtor in the area (Santa Barbara County) seems able to help us.
Meadow Vista, CA

March 19, 2013
How do I determine value of interest in land as of 2002?

Q. 170 vacant, unimproved acres (3/4 mile on beach), with ownership split 40 ways within extended family, sold to Land Conservancy in 2012. Our portion is about 1.2% and was given to us in 2002 by father. How do we determine value of property in 2002 for income tax purposes? No realtor in area (Santa Barbara Co.) can help us.

Meadow Vista, CA

March 18, 2013
Is home a rental or a second home?

Q. My son lost his house to foreclosure in 2010. My wife and I purchased a foreclosed home in Sep 2012 for him and family to live in. We are sole property owners on the deed with my son making the mortgage, utility payments, closing cost repayment with additional money for needed repairs. I made repairs and improvements on the property in 2012. When his credit is re-established, our intent is for him to refinance the mortgage balance and purchase the house.
For tax purposes, since we bought the house, is this a rental property or a second home? If it is a rental property, I am not asking fair market rent for this property. However, I want to receive tax benefits for closing costs, taxes, insurance, improvements, etc. As long as he continues payment of all financial costs, we do not consider this home a money making investment, but an investment in my son's future. Please advise.
Sacramento, CA

March 16, 2013
Help: How do we correct a botched trust?

Q: We hired a lawyer to make our trust. Ever since, we've been living a nightmare. The trust has so many mistakes. We asked the lawyer to correct the problems. Eventually we were "fired" by our lawyer, saying we should find another attorney to help us.

We have tried to find someone but nobody wants to revoke our trust as we asked or correct the mistakes. Where do we go from here? We have an unusable trust. We are in our senior years and can't afford to throw money away, one lawyer at a time. (Of course, the attorney cashed our $1,000 check.) Help!

Trusting, Sacramento

March 11, 2013
How does an ex-felon re-enter the workforce after jail?

Q: How does a 25-year-old - with a high school diploma and work experience only in the fast-food area - re-enter the workforce after two years of incarceration for various drug-related charges? What fields are most likely to take an ex-felon? Do you recommend admitting the felony upfront on the application? Or do you wait and discuss it if/when you get an interview?
Sacramento, CA

March 11, 2013
How can I make a minor amendment to my existing trust?

My revocable trust is complete. However, I would like to make a small change, involving a cash amount that I will be leaving for a relative. Can I change it myself and have it notarized? Attorney are $300-$500 and I am unemployed at this time. If I cannot do this myself, what is the best way that will not cost me very much?
Stefanie, Sacramento

March 10, 2013
Does the IRS impose a tax on a foreign inheritance?

Q. My father moved to Australia in 1987 and became a citizen there (I am a born and raised American citizen). He is setting up my inheritance (bank, home, stocks). Australia does not have inheritance tax, but I heard the IRS will tax the heck out of me. I suggested he put me on his house, bank and stocks to reduce or eliminate taxes. Is this correct? Do I have any other options? The total of the above will be just under $500,000. Thanks. Sparky, Florida

March 9, 2013
Military spouses: Fellowships for financial advising careers open until March 31

If you're a military spouse looking for a new financial career, there might be a scholarship in your future. Now through March 31, online applications are open for the FINRA Investor Education Foundation's Military Spouse Fellowship Program.

It's a chance to learn more about personal finances, debt counseling and money management skills, both for your own family and for career opportunities. Fellows are covered for all course materials, online webinars and exam fees needed to earn the Accredited Financial Counselor (AFC) designation.

The fellowships are open to military spouses of retired or active-duty service members in all branches: Air Force, Army, Coast Guard, Marine Corps, Navy. Widows/widowers of service members are also eligible.

In the past eight years, 385 individuals in the program have graduated as accredited financial advisers, getting jobs as counselors at military family support centers, tax centers, financial aid offices and credit unions throughout the U.S. and overseas, according to FINRA.

You can read profiles of recent FINRA fellowship participants.

March 8, 2013
IRS offers free tax workshops for small businesses

Small business owners can get free advice on payroll taxes and other basics at a series of IRS-sponsored workshops offered statewide, now through December.

In the Sacramento area, there are more than 20 different workshops held in various locations, covering payroll taxes, recordkeeping systems, business income/deductions, as well as how to file and pay business fees.

They're designed for those currently running a small business or contemplating doing so. Several are offered in Russian or Spanish.

If you'd rather get the info from your computer, the IRS offers a series of online videos for small businesses and the self-employed on its Virtual Small Business Tax Workshop page.

March 5, 2013
IRS: All taxpayers can now file their 2012 returns

Fire up your tax forms: Ending a nagging delay in the 2012 tax season, the Internal Revenue Service announced it has finished updating, installing and testing new forms, instructions and other changes to its massive tax-processing systems.

That means all individual and business taxpayers can now file their 2012 federal income tax returns, including those who had to wait to claim various business and personal tax credits or deductions, such as residential energy credits.

This year, the IRS could only accept 2012 tax returns in phases, starting in late January. The delay was primarily due to last-minute "fiscal cliff" tax laws enacted by Congress, which required the IRS to scramble in getting those changes incorporated into its computers.

With less than six weeks before this year's April 15 filing deadline, the IRS is reminding taxpayers that the best way to file an accurate return is to e-file, choose direct deposit if expecting a refund and use online tax-help resources.

Those who need more time to finish their tax returns can get an automatic, six-month tax-filing extension by going to the Free File link or filing IRS Form 4868.

March 5, 2013
Can my Social Security income be garnished by the Franchise Tax Board?

Q: I've got a state tax lien from the state Franchise Tax Board. With the new federal requirement that Social Security checks have to be received by electronic payment, I now have to open a bank account to get my monthly check. Does that mean my bank account could be garnished to pay my back taxes?

March 4, 2013
Does a return need to be filed if no tax is due or I'm getting a refund?

Q: My college-aged kid just filed a federal return to get a $100 refund. But there is no state refund or tax due. Should he file a state tax return anyway?

March 2, 2013
Should I accept an "enhanced surrender" offer for my variable annuity?

Q: I have a variable annuity with a major insurance company. They have made me an offer of an enhanced surrender. The offer is my contract value plus 20 percent of my payment base. They are making this offer because of high market volatility, decline in the equity markets and low interest rates. In other words, it's costing them money to maintain these accounts. I don't have to accept the offer. My question: Should I go for this or not?

Ray, Sacramento

March 1, 2013
How do I cancel my ex-spouse's use of our child's tax exemption?

Q: I have a tax return question. Last year, I signed IRS Form 8332 giving my then-husband the ability to claim our youngest son on his taxes. We were separated and in the midst of a divorce. After filing last year's return, our divorce was finalized.

In the divorce agreement, it was agreed that I would claim our youngest son on my taxes. We have two kids and they both live with me full time and occasionally visit their dad, who moved out of state. When preparing 2012 taxes, is there a form that needs to be fill out that cancels out the 8332 form that I signed last year?
Sacramento, CA

March 1, 2013
Should I use overtime paychecks for my 401(k) contribution?

Q: Would it be better tax-wise to use overtime cash payments (I think overtime payments are taxed much higher) at the end of the year to pay for my full year 401(k) contributions, rather than money from my paycheck?

Sacramento, CA

March 1, 2013
Can we deduct loss from sale of inherited house?

Q. My siblings and I (9 of us) inherited my mom's house in Oct 2009 which was in a trust. The market was down so we decided to wait until the market picked up before selling it. It was apprasied at $785K and we sold it in Nov 2012 for $810K. After subtracting real estate commission of 5% and other closing costs, the net to us was $763K. The net loss for each of us is $2,444. Can we deduct the capital loss against our income?

Oakland, CA

Meet Our Financial Experts

Claudia Buck

Claudia Buck is The Sacramento Bee's personal finance columnist. Read all her columns here. Contact her at

Terri Carpenter

Terri Carpenter offers advice on job hunting, retraining and career counseling. Carpenter works at Sacramento Works Inc., the career and job training arm of the Sacramento Employment and Training Agency (SETA). With 15 years in the field, she has hands-on experience with everyone from first-time job seekers to career professionals seeking advice after a layoff or looking for a mid-career change. Ask her a question.

Carlena Tapella

Carlena Tapella is a partner in the law firm of Webb & Tapella Law Corp. in Sacramento. The firm specializes in estate planning and probate, such as estates, trusts, conservatorships and litigation. She is a past president of the Sacramento County Bar Association's Estate Planning & Probate Section. Ask her a question.

Kimberly Foss

Kimberly Foss, certified financial planner, is the founder of Empyrion Wealth Management in Roseville. With nearly 30 years in the financial industry, her clients include women in transition, small business owners, retirees and "pre-retirees." Ask her a question.

Jesse Weller

Gregory Burke, a CPA and tax expert with John Waddell & Co. in Sacramento since 1984, worked as an IRS tax auditor for six years. He’s a past chairman of the California Society of CPAs. Ask him a question.

Daniel Tahara

Daniel Tahara takes your questions about California taxes. Tahara, a spokesman for the state Franchise Tax Board, has 10 years of experience as a tax auditor. Ask him a question.

Personal Finance columns

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