Wednesday, April 1
Posted 2 p.m. EDT
Are you sitting down? Good. Because April 1 is no joke for some taxpayers.
If you turned 70½ last year and put off taking your 2008 required minimum distribution, you must do so today or face stiff IRS penalties.
Required minimum distributions, or RMDs, are mandatory withdrawals from tax-deferred retirement accounts. The bottom line is that the IRS has been waiting years to collect on your earnings. Your 70½ birthday is the tax collector's chance.
If that half-birthday celebration came last year, you might have decided to put off the retirement plan withdrawal, and taxes, until this April 1. Well, time's up.
I know what you're saying. RMDs have been waived for 2009. You're right, and I said so in Bankrate's tax tip on the topic.
But the suspension applies only to 2009 RMDs. Today's deadline is for 2008 required withdrawals, and those are still due. So if this applies to you then you need to call your plan manager now and make sure you take out the minimum amount.
If you don't, the IRS will charge you 50 percent of what you should have withdrawn.
Smokers now pay more: Today also is a sad day for smokers. The federal excise tax on tobacco took a big jump when April 1 rolled around.
Cigarette smokers will find they are paying 62 cents per pack more. That's the single largest federal tobacco tax increase ever.
Users of other tobacco products also will pay more, as hefty tax increase also apply to those nicotine-laced items.
You can check out what your specific charge will be at the Alcohol and Tobacco Tax and Trade Bureau's special Web page detailing the tobacco tax hikes.
If today's tobacco tax increase is enough to finally get you to give up the cigs, I have some good tax news for you. You can include the cost of a stop-smoking program in the medical expenses you claim on Schedule A. Unfortunately, over-the-counter items such as nicotine patches, nicotine gum and nicotine lozenges can't be counted.
The bad news is that smoking cessation program costs are part of your itemized medical deductions, which must exceed 7.5 percent of your adjusted gross income before you can claim them.
But wait, here's a bit more good news. There are many ways to maximize medical deductions, and your effort to give up smoking might just be the amount that gets your deduction amount over the threshold.
As a former smoker and fellow taxpayer, I wish you the best of luck in both endeavors!