According to a recent Moneywatch article, you might want to take another look at your 2010 tax return before you file it away for good – it could contain some valuable lessons for reducing next year’s taxes. For instance:

• Did you get a big refund? A refund of a few thousand dollars or more might seem like a welcome windfall, but it actually represents a year-long loan to Uncle Sam, interest-free. Instead of letting the government use your money all year, it makes sense to put your money to work for you by saving for your kids’ or grandkids’ college expenses, building up your retirement fund, or paying down debt.  This means reducing your withholding through your employer, or cutting back on the estimated tax you pay if you’re self-employed.
• Investing in Mutual Funds? Beware of taxable distributions. Before you invest in a mutual fund, you might want to ask whether the fund company will be making a distribution soon. If a distribution is on the horizon, it may pay to wait to invest until after the distribution is made – this way, you avoid the capital gains tax you’d have to pay on the distribution.
• Do You Keep Good Tax Records? Good recordkeeping (meaning keeping what you need in an organized manner, and tossing what you don’t need) can not only help reduce the time and energy you spend doing your taxes, it can also help to ensure you don’t miss opportunities to reduce your tax bill.

Taking a second look at this year’s tax return can provide you with insights that could save you time, money, and hassle in the coming years.

The Law Offices of James A. Miller is a member of the American Academy of Estate Planning Attorneys.

Most of us try to be as responsible as possible when it comes to financial matters, and we’re pretty careful when it comes to credit cards. But FoxBusiness.com recently published an article warning of eight seemingly benign situations in which many of us hand over our credit cards when we really shouldn’t. Here are some of the highlights:

1.       Allowing Access to Children (or Grandchildren): While many of us wouldn’t give our young kids or grandkids unlimited access to our credit cards, those of us with a PC, smart phone, or iPad might be unwittingly asking for a shock when we look at our credit card statement. Consider this story from British Columbia: In January, a 7-year-old using an iPod found a gaming application called Touch Pets-Dogs 2. Her parents had a credit card on file with iTunes, so she was able to run up an $852 bill for an hour’s worth of play without her parents’ knowledge. The lesson? Giving children unfettered access to your computer or phone can result in financial consequences you may not have planned on.

2.       Giving Information to a Caller Investigating a Credit Card Scam. What do you do when you receive a legitimate-sounding phone call from someone claiming to be a police officer or a representative of your financial institution, claiming that your credit card account has been compromised and asking you to verify your card number? The first step is not to give this information to the caller; the call itself is likely from a scam artist. Legitimate agencies don’t ask for card or account numbers. Instead of continuing the conversation, you should hang up and call the customer service number on the back of your card to verify there’s no problem with your account.

3.       Giving Your Card to the Hired Help. It’s convenient to give your credit card to a contractor so that he can buy materials for your home improvement project, or to your nanny or housekeeper for the purchase of household supplies. Unfortunately, doing this means risking unauthorized use or even theft of your card. Instead, it’s safer to purchase materials or supplies yourself.

The Law Offices of James A. Miller is a member of the American Academy of Estate Planning Attorneys.

If you’re self-employed, retirement planning may take a little more effort than it does for traditional employees, but there are a number of options available to you. Here are two of the most popular:

• SEP IRA: A SEP IRA might be the simplest retirement account available to self-employed individuals and owner and spouse businesses. It’s easy to set up, and there’s not a lot of paperwork to keep up with.

With a SEP IRA, you’re allowed to contribute up to 25% of your W-2 income or up to 20% of your net self-employment income, up to a government-defined maximum limit. This maximum limit is quite high – this year, it’s $49,000.

There are some drawbacks to this type of retirement account. For instance, you’ll only want a SEP IRA if you don’t anticipate taking a loan against your IRA balance – there are no loans allowed. Plus, if you’re over age 50, there’s no additional catch-up amount; with other retirement plans, those over 50 can contribute extra each year in order to get ready for retirement.

• Individual 401(k): Establishing an Individual 401(k) is a little more complicated than setting up a SEP-IRA, and there’s more administrative work involved, but this type of retirement plan has its advantages.

For instance, although the cap on contributions is similar – for 2010 it’s $49,000 – contribution percentages are calculated differently for an Individual 401(k), meaning that you may be able to contribute a higher percentage of your income. Also, if you’re over age 50, you’re allowed to make additional “catch up” contributions. This year, people over age 50 can contribute up to an extra $5,500.

If there’s a chance you might need to borrow money against your retirement account, the Individual 401(k) may be a good fit for you. You’re allowed to borrow up to 50% of your account balance, with a total loan limit of $50,000.

The Law Offices of James A. Miller is a member of the American Academy of Estate Planning Attorneys.

We’ve all heard of mutual funds, and most of us, especially if we have a 401(k) or IRA, probably own mutual funds. But, do you really know what a mutual fund is? Here’s a basic definition.

A mutual fund is an investment in which a group of investors have pooled their money and hired someone, called a portfolio manager, to invest that money in a variety of securities (such as stocks or bonds) on behalf of the group. The portfolio manager’s job, beyond the purchase of the initial securities, is to manage the fund by buying and selling additional stocks, bonds, and other securities according to the fund’s objective, which is spelled out in a document called the prospectus.

So, when a new investor buys shares of a mutual fund, the portfolio manager takes the money invested by the new investor and pools it with money of the fund’s other investors, in order to buy and sell further securities in accordance with the fund’s prospectus.

For conservative investors, mutual funds present several advantages. One is that, for a relatively low investment, you get a professionally managed and diversified portfolio. This reduces the hassle and the risk of buying a variety of individual securities on your own.

Diversification increases your chance for steady growth over time – even if one stock does very poorly over the course of a quarter or even a year, you haven’t lost your entire investment; other securities within the fund are likely to have done well.

Further, compared to other types of pooled investment funds, like hedge funds, mutual funds are strictly regulated – this gives investors confidence in the reliability.

Like any other investment, it’s essential to do your research and get the advice of a qualified financial planner before parting with your hard-earned money.

The Law Offices of James A. Miller is a member of the American Academy of Estate Planning Attorneys.

Roughly 1,600 people who tried to be responsible with their health insurance spending have just gotten a very rude awakening –the money they deposited in their Health Savings Accounts was stolen, and it’s unlikely they’ll be repaid. Canopy Financial, Inc., the company managing their funds, was recently liquidated under Chapter 7 bankruptcy after a major financial scandal, and two of Canopy’s former executives have been indicted on criminal charges. Even worse for the people who had their HSA’s with Canopy is the fact that their accounts were not federally insured, so they had no protection and have no real recourse for getting their money back.

How can you learn from the unfortunate experience of the Canopy victims?

If you’re in the market for a health savings account, make sure that the account is insured with the Federal Deposit Insurance Corporation (FDIC), just like your checking accounts, savings accounts, or IRA’s. Accounts that are insured in this way are also referred to as “pass through” HSA’s.

There’s always a risk, however slight, that a plan manager will mishandle the funds that he or she is in charge of. It’s happened more than once in recent years, with retirement plans as well as health savings accounts. As an individual account holder, you have little control over this type of misappropriation.

FDIC insurance does not cost you anything, and it gives you peace of mind. If you have a “pass through” HSA and your plan manager runs off with the money, or the bank where it’s deposited fails, the federal government guarantees the funds deposited in your individual account up to $250,000. It’s worth taking the extra step to make sure that your HSA is covered.

The Law Offices of James A. Miller is a member of the American Academy of Estate Planning Attorneys.

If you’re expecting an inheritance, you may want to remember a common but very wise saying: don’t count your chickens before they hatch. The truth is, individual inheritances are becoming smaller and less likely for a number of reasons:

• With our population aging and life expectancies getting longer, people are forced to spend their money on their own increased living expenses rather than passing their wealth on to younger generations .
• Fewer people have pensions, so they’re at the mercy of the market, making their wealth more precarious.
• The reverse mortgage market is gaining popularity, making it easier to turn a house’s equity into an income stream and leaving nothing for the kids.

Now, if you do get an inheritance, you’ll want to have a plan – financial experts say that 70% of all inheritances are spent within the first three years. Here are some tips to help you stay ahead of the statistics.

• Try not to go crazy. When you come into a bunch of money, it can feel like you’re suddenly rich. Couple this with the fact that you’re likely to be in the middle of a very emotional time in your life, and it’s easy to act like a lottery winner. Instead, take a breather and give yourself some time to make rational decisions about what to do with the money.
• Pay off debt. This is a prime opportunity to get your financial house in order. If you have consumer debt, consider paying it off.
• Get some good advice and make a plan. Talk to a financial advisor and an estate planning attorney, and put your inheritance to good use by including it in a solid financial plan, featuring an estate plan of your own.

The Law Offices of James A. Miller is a member of the American Academy of Estate Planning Attorneys.