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Tuesday, December 28, 2010


by JC Leahy, MA Accounting


If you have taxable earned income and you are less than 70.5 years old, you can establish a traditional IRA.  Earned income includes salary, wages, commissions, self-employment income, alimony, and combat pay.  It does not include any pensions (including Social Security), interest, dividends, or annuities.  In the year you reach the age of 70.5, you can no longer establish or contribute to a traditional IRA.


For 2010 and/or 2011, you can contribute $5,000 per year or the amount of your taxable earned income, whichever is less,  to a traditional IRA.  This is true whether you are covered by a retirement plan or not.  If you have reached the age of 50 during the year, you may contribute an additional $1,000 catch-up contribution.  This makes a total limit of $6,000.

Here's the exception.  It's a good one: If one spouse doesn't work or earns less than $5,000, he/she may establish and contribute to an IRA based on the earnings of the other spouse.  Between them, there is a limit of $10,000, which can be allocated in any way they wish between their two IRA accounts -- provided that neither one's account receives more than $5,000. For example, if the husband makes $100,000 and the wife makes zero of earned income, the wife may contribute up to $5,000 into her traditional IRA and the husband, likewise, may put up to $5,000 into his IRA.  This also applies to the $1,000 catch up contribution.

One other fine point:  If you have a Traditional IRAand also a Roth IRA, the $5,000/$6,000 limit includes both. In other words, you can only contribute $5,000/$6,000 TOTAL between the two.


The really great news is that you have until the April, 2011 tax filing deadline to open your Traditional IRA account and make your 2010 contribution. 


If you are not covered by a retirement plan at work at any time during the year, you can deduct every penny of your traditional IRA contribution.  That's simple.

It's slightly more complicated if you were covered by a retirement plan at work.  In that case, if your "Modified Adjusted Gross Income" (MAGI) is less than certain thresholds, you still get to deduct your entire Traditional IRA contribution.  For 2010, this threshold is $56,000  for Single or Head of Household filers, and $89,000 for Married Filing Jointly or Qualifying Widower filers.  Above those thresholds, the deductible portion phases out between $56,000 and $66,000 for Singles and Head of Household, and $89,000 and $109,000 for Married-Joint and Qualifying Widower filers.  If MAGI is greater than $66,000 ($109,000 for Married-Joint)  then NONE of your Traditional IRA contribution can be deducted.  But you can still make your $5,000/$6,000 contribution to the IRA account -- you just won't be able to deduct it.

In situations when you can't deduct your Traditional IRA contribution, why would you want to make the contribution at all?  There are two reasons.  First, earnings accumulate and compound every year without being diminished by annual income taxes.  You only pay the tax on earnings when you withdraw them in your old age -- and you will probably be in a lower tax bracket then.  Second, if you have a nondeductible Traditional IRA contribution, you get what is called a "basis" in your IRA account.  This just means that when you eventually withdraw from your IRA, the "basis" portion will not be taxable.

If you need assistance with your income tax filing this Tax Season, you might want to contact:

JC Leahy, MA Accounting
Maximum Legal Refund (TM)
Tax Help When You Need It!!! (TM)
Silver Spring, Maryland
Tel. (301)537-5365



Monday, December 27, 2010


By JC Leahy, MA Accounting
Maximum Legal Refund (TM)
Income Tax Preparation & Consulting
Silver Spring, MD 
Tel. (301)537-5365

Personally, I think that 2010 may come to be called the Year of the Roth Rollover. If you have a traditional IRA, you really ought to make yourself aware of some big changes that happen January 1. These changes result from 2 laws passed by Congress during the Bush administration, and they may help you as you struggle tobuild a secure retirement.

Here’s the "Roth Conversion" deal  in 2009, before the changes: If you wanted to convert funds from a traditional IRA to a Roth IRA and your 2009 tax return shows a "modified adjusted gross income" of $100,000 or more -- you were prohibited. If you’re married and filing a separate return from your spouse, you were prohibited. If you weren't affected by these 2 prohibitions and you, indeed, converted funds from IRA to Roth IRA, every single dollar converted added a dollar to your 2009 taxable income and thereby increased your 2009 income tax liability.

Fast forward to January, 2010. The $100,000 income prohibition and the married-filing-separate prohibition both disappeared! Poof! Furthermore, any amount you convert from IRA to Roth IRA in 2010 may not add a dime to your 2010 taxable income. You actually have a choice. Either pay taxes on the full amount in 2010 or pay taxes on zero. If you chose the latter, then you will have to split the additional income between your 2011 and 2012 tax returns. This amounts to a two-year interest-free loan from the government. What a deal!

So, why would you want to have a Roth IRA rather than regular IRA in the first place? Well, provided you follow the rules, your Roth IRA earnings will never be taxed. You won’t be prohibited from making Roth IRA contributions when you turn 70.5 year of age. And there are no mandatory withdrawals when you turn age 70.5.

These wonderful changes result from provisions of two Bush-era laws just now taking effect. These are the Tax Increase Prevention and Reconciliation Act (TIRPA) of 2006, and the Economic Growth and Tax Relief and Reconciliation Act of 2001 (EGTRRA).

If you have money in a traditional IRA, 2010 certainly looks like the year to think about making a Roth conversion. Check with your tax advisor.
2010 IRA (Roth and Traditional) Contribution Limits
Year AGE 49 and BELOW / AGE 50 and ABOVE
2002-2004 $3,000 / $3,500
2005 $4,000 / $4,500
2006-2007 $4,000 / $5,000
2008 $5,000 / $6,000
2009 $5,000 / $6,000
2010 $5,000 / $6,000
The above limits do not apply to Roth IRA conversions.

Sunday, December 26, 2010


By JC Leahy
MA, Accounting
Maximum Legal Refund (TM)
Income Taxes Minimized to Your Best Advantage (TM)
Silver Spring, Maryland

If you would like help preparing your income tax returns, email or phone (301)537-5365  

Congress can make the simplest thing complicated, and the Child and Dependent Care Expense Tax Credit is no exception. The simple concept is for the Tax Code to help both spouses to be employed outside the home by lightening the burden of child care expenses. This is one of the few personal tax credits that do not phase out because of high income levels. In fact, a couple could have an adjusted gross income of a billion dollars and still claim the Child and Dependent Care Expense Credit.

This is a nonrefundable credit. "Nonrefundable" means that the credit is limited to your income tax liability. Therefore, if you're low-income and your tax liability is consequently zero, then -- sorry -- your Child and Dependent Care Expense Credit is zero, too. Also, if you improved the energy efficiency of your home, for example, with energy efficient windows, and you therefore claimed the Nonbusiness Energy Property Credit (up to $1,500), you will probably be surprised to learn that the Child and Dependent Care Expense Credit will be subtracted from your Nonbusiness Energy Property Credit -- resulting, effectively, in a reduced or eliminated Child and Dependent Care Expense Credit. This is an odd case of qualifying for a tax credit but not actually receiving any money for it. (You have to plan your taxes carefully because the rules are often a bit of a shell game.)

There are some other limits. If you are married filing separate returns, your Child and Dependent Care Credit is limited to zero -- unless the married spouses lived apart for the last 6 months of the year, in which case, one or both may qualify for the full credit as heads-of-household. As heads of households, if they have 4 children (or other qualified dependents) there is the potential to more than double the Child and Dependent Care Credit by simply not living together. Also, expenses associated with the credit are limited to the earned income of the spouse who had the least earned income. The idea is, after all, to encourage the second spouse to put the kids into child care and go out to work, so if there is no second income there is no tax credit. One intersting exception occurs in the case of the couple with children living together without the benefit of marriage. In this case, the fact that one partner does not have any earned income will NOT limit the Child and Dependent Care Credit - because the partner who does have earned income will file as head of household and claim the children (and possibly the partner) as dependents -- thereby being eligible for the full credit. Another exception occurs when one spouse is disabled. The disabled spouse is deemed to have gone out to work even though he or she did not. The disabled spouse is deemed to have had earned income of $250 per month if there is one qualifying child or $500 per month if there were 2 children. Another exception occurs when one spouse is a full-time student for at least 5 months of the year. That student spouse is treated like a disabled spouse. Still another exception may occur when a couple is unmarried, has children, and both are employed. In this case, for all practical purposes, the 2 parents in aggregate may qualify for MORE THAN double the Child and Dependent Credit that they would get if they were married. Why would it be more than double?  Because in computing the credit, they would count a maximum 4 children instead of 2, and by separating their incomes into 2 separate tax returns, they probably each qualify for a higher credit percentage.

The credit percentage is a multiplier used to compute the Child and Dependent Care Credit. Up to $3,000 of expenses per child for up to 2 qualifying children are allowed -- at total of $6,000.  This total is multiplied by the credit percentage to compute the tax credit. The credit percentage ranges from 35% to 20% depending on Adjusted Gross Income (AGI). The same percentage table is used for married couples and others. Therefore, by being married and combining their incomes, married couples have a lower credit percentage than if they were not married. And if they have 4 children, for purposes of this credit, married couples can only claim half of the children (2) that they could if they were unmarried (2 each = 4).

Children qualify if they are under the age of 13. Once they are over 13, you cannot claim the Child and Dependent Care Credit for their care. Here is an important point, however: In they year that the child turns 13, you can still claim the Child and Dependent Care Expense Credit for the period before his birthday.

Besides dependent children under the age of 13, you can also claim this credit for expenses related to a physically or mentally incapacitated dependent OR SPOUSE who lives with you for at least half of the year. This could include, for example, an elderly parent.

Another wrinkle: Some expenses that qualify for this credit may also qualify as medical expenses on your Schedule A. In this case, you may list some expenses as an itemized (Schedule A) deduction and others as Child and Dependent Care expenses -- but the same expense may not be listed in both places.

If you have questions, you may contact the author directly at:

If you would like help preparing your income tax return, e-mail -- or phone (301)537-5365.

Friday, December 17, 2010


Fisker Karma interior
 JC Leahy

I believe my next car will be electric or plug-in Hybrid. Google the Fisker Karma for an example of a very cool plug-in hybrid. It's available in February. In electric-only mode, it has a range of 50 miles and will go 95 mph;  switch to the gasoline-assisted mode and the range is 250 miles and the top speed 125 mph!!  For me, 50 miles would get me to and from work with no problem and NO gasoline!!  There's an optional solar charger to run your entire commute off the grid, on solar power !!!!!!!!!  Wow! That makes it a solar powered car!!  I'm getting TIRED of sending petrodollars to people who want to kill me!!!
Fisker Karma - Available February, 2011

Thursday, December 16, 2010


By JC Leahy

We're expecting snow today and wouldn't it be the day that my 4x4 Explorer is in the shop!!!  It happened like this:  I was on the Washington Beltway in moderate, moving-right-along traffic.  A car came up fast in the lane to my right.  Something about the way he was driving made me alert, thank goodness!!  As soon as he had passed my front bumper, he pulled over in front of me and SLAMMED on his brakes.  Obviously, he was trying to have an accident, although I do not understand why.  Well, I SLAMMED on my brakes just as quick as you like, and did NOT hit him.  However, half a mile later, when I tapped on my brakes for a more routine manoeuvre, the pedal went ALL the

way to the floor with almost no effect!  Gently, I drove the 155,000-mile-old Explorer to my trusted local garage and left it there.  As it turned out, the stress of stopping the old beast had ruptured a brake line.  Because of corrosion, the brake line couldn't be disconnected from some other brake components, which would therefore need replacement.  There was also another brake line badly rusted, which I decided to replace as a precautionary measure.  Total damage: $850. Yikes!!!  I just had a $500 "oil change" last month, and some other repair bills before that!!  It's getting to be a high-maintenance vehicle!!!   I'm just thankful that my reaction time was so quick!!  Why do people drive like that??!!

Wednesday, December 15, 2010


By JC Leahy, MA Accounting, BS Business Administration

It's a wonderful world! Federal Judge Henry E. Hudson, ruling for the US District Court for the Eastern District of Virginia, has decided in favor of the obvious.!!! The Obama-Pelosi Democratic Health Care law is unconstitutional.  This health care scheme absolutely depends on forcing everyone to pay into the insurance system so that those who take care of their health can be forced to pay for those who don't, so that those who prefer to be frugal with their health care dollars in favor of other things or saving can be forced to pay for unconstrained health-care consumption of others, and so that those who would save for theie old-age health care needs  can be dispossessed in favor of more "socially beneficial" use of their money.  Anyone who will PLEASE just pick up a copy of the Constitution and read it can see that the Federal government does not have the authority to implement the Democratic health care plan.

The Silver Penant Plan, on the other hand, does not depend on forcing everyone to pay.  It hinges on rewarding those who would save for the health care of themselves and those they love, while making the actual consumption of health care services voluntary and subject to the constraints and principles of supply-and-demand.

Monday, December 13, 2010


By JC Leahy

Everyone knows that I revel in a summertime jaunt to the seaside. I adore a romantic dip at a secluded beach!! I relish the bustling boardwalk, the salt water kayaking,  the restaurants, the cruising the boulevard in my convertible!! That much is common knowledge. What is less known is that I enjoy escaping to the seaside in winter, too. The lures of the beach in winter are many, but appreciated by few.
Ocean City, Maryland - Canal & deserted walkway in winter

Ironically, it is the fact that few appreciate the seaside in winter which is the very fountainhead of the seaside's winter attraction. In winter the recreational infrastructure designed for many  is employed by nearly no one. Lodgings are empty and the rates they offer in winter are ridiculous. Find an indoor swimming pool and you will probably find nearly secluded swimming.  Find a restaurant and there will be no little pager to hold and no waiting time.  There will be no lines at theaters, either.  The indoor gyms will be frequented only by local regulars. With the Progressives destroying the economy as they are, reatil stores that have not gone belly-up  will be dying to sell you something, off season a the seaside.
Swimming practice

Indoor pool in Ocean City -- So deserted it's almost like having your own private pool!
For the past several years, Dali and I have gone to Ocean City, Maryland in December, January and February -- before my income-tax-filing business makes me crazy-busy.  I prefer January and February to December. In January and February, we almost have the place to ourselves. My favorite place to stay is Club Ocean Villas II, located along one of those canals perpendicular Coastal Highway -- near the Green Turtle sports bar.  There, you get a two-bedroom, two-bathroom, fully equipped suite with an outdoor whirlpool tub outside your bedroom. The lodgings are very warm and comfortable. Our door has opened directly onto a deserted-in-winter canal, usually frozen solid, and our hot-tub has been in semi public at the canal side. At the end of the day, sitting in a hot whirlpool on a cold winter day in a driving snowstorm is a very interesting and relaxing way to commiserate with one's mate. In the deserted state of winter, public area be damned, clothing is strictly optional. The only hard part is getting out of the comfortable, warm whirlpool to go back through the freezing cold to one's quarters!

I love to swim. The Ocean Villas II swimming pool is indoors, heated, and deserted in winter. While staying there, Dali and I swim every day. We usually have the pool entirely to ourselves. That is excellent for Dali because she is self conscious about learning to swim. She does well with privacy and a little space to learn. After the swimming, her face is bright with a sense of accomplishment. The next day, her whole body aches a little for the exercise. On occasions when other swimmers enter the pool, it's just Dali and me and them. There is no ignoring each other. We all talk. It's pleasant socialization.

This oceanside gym is nearly empty in winter.
There are many indoor gyms at a typical seaside resort town. Some are private, for guests only. Others are open to the public. Everywhere we've stayed, the lodging fee has included a public gym pass. Club Ocean Villas II provides a pass to the nearby Gold's Gym. There's no crowd at Gold's Gym at the seaside in winter. Only a cadre of local regulars that appears every day. They know each other. They chat, sip coffee, and work up a sweat on the ample equipment. But there aren't  many of them, so you can use any equipment you want, when you want, for as long as you want.

Winter shopping at Ocean City is an experience. If you venture out of the key tourist areas, the panorama resembles something from a documentary about the Great Depression. Whole shopping centers and business facilities sit empty, sad, and deteriorating. But in the more fortunate Coastal Highway corridor, the stores are open and they are dying to make a sale. Between the two of us, Dali is the inveterate shopper. I go along, reluctantly.  In terms of shopping preferences, I'm a typical guy:  I generally go to the store only if need something.  I enter the store. I find the item. I buy it. I leave. That's how a lot of us guys tend to shop. Sociologists say we're in the hunting mode, as opposed to women's gathering mode.  Nevertheless,  some of the winter deals at the seaside can convert me into the gathering mode, and then I definitley shop with gusto!!
8/28/2010 - 500,000 demonstrators converge on Congress

Movie theaters, too, appear nearly deserted in winter. They're playing the movies, but there is no one in the parking lots. So, there is not line to see whatever is the latest craze movie of the moment.

How much does all this cost? How much to you pay for a long 4 day weekend in a 2-bedroom, 2 bathroom suite with, 3 TV's, DVD, VCR, WiFi, sauna, essentially your own private indoor swimming pool, private outdoor hot spa, with unlimited gym access a block from the sea in downtown Ocean City? Well, we got a special deal. For us, it's -- eh -- about $90 -- including tax --- not per night, total. But the regular winter rate is $69-$79 per night, which is a jaw-dropping deal for a relaxing winter getaway. I recommend a room facing the canal, lower level if possible. That way, you will have the most seclusion with the nearest access to your hot tub.

Here's the Ocean Villas II web site, if you want to check it out. Obviously, there are lots of other places to stay in Ocean City, but I can vouch for this place.


Monday, December 6, 2010


by JC Leahy
If you like to write,  you may be interested in this collection of my favorite articles about how to write a book review.  I suppose much the same advice might apply to movie reviews.

When you see a movie or read a book, it might be fun to write about it.

How to write a book review, Queens Library

How to write a book review, LA Valley Library

How to write a book review, University of Waterloo

How to write a book review, Dalhousie University

Friday, December 3, 2010


How can Congress freeze Federal employees' salaries on the one hand and simultaneously justify increased spending of 6.2 billion dollars per year on the Dream Act???!!!!!!

JC Leahy

Thursday, December 2, 2010


By JC Leahy


The annual model train display in Ellicott City, Maryland, provides a fun springboard for Christmas shopping in the enamoring downtown Ellicott City.  This elaborate model train display usually runs from the first Saturday in December through the first Sunday in January.  You might want to mark you calendar now so you don't forget.  The 2010 show opens this coming Saturday.

The display is provided by the Ellicott City Fire Company #2.  It is situated at their firehouse, at 4150 Montgomery Road, Ellicott City, Maryland.  The Fire Company has been providing this display every year since 1997.

The display includes multiple model trains on an artfully crafted landscape.  For example, the 2009 display comprised 8 trains, including an Amtrak passenger train, a circus train, and a long freight train.  All trains are in motion -- through towns, across bridges, around mountains, and through tunnels.  The overall effect is delightful for children -- of all ages.  The passion that went into the design and crafting of the whole display is evident.

You can actually buy model trains and accessories at the firehouse.  The brand is Rail Master.

Mark your calendar for this event now, so you won't forget. Check hours of operation before you actually go.  Typiclly, the model train display is open on weekends and some weekdays.  For more information, call 410-313-2036.