query: Clarification on student expenses - To file the tax for the next year

positive: Assuming here that you're talking about deducting your tuition as a below the line deduction as a business expense or similar, then it depends. Per 1.162-5, if the education: Then it qualifies as a legitimate business expense and is deductible.  If not - if you're going to school for a different career, such as someone employed as a waiter but going to school to get a degree in nursing, or someone employed as a teacher getting a law degree - then it's not; you'd have to qualify under one of the other (simpler, but lesser) credits. Read more on this topic at Tax topic 513. Note that the other most commonly applicable deduction - the above the line Tuition and Fees deduction - expired in 2016 and is not applicable (yet?) in 2017, and further would not require most of what you describe as it only counts tuition and fees paid directly to the institution and required as a condition of attendance, so books, parking, etc. don't count.

negative: "First off, leaving money in a 529 account is not that bad, since you may always change the beneficiary to most any blood relative.  So if you have leftovers, you don't HAVE to pay the 10% penalty if you have a grandchild, for instance, that can use it.  But if you would rather have the money out, then you need a strategy to get it out that is tax efficient. My prescription for managing a situation like this is not to pay directly out of the 529 account, but instead calculate your cost of education up-front and withdraw that money at the beginning of the school year.  You can keep it in a separate account, but that's not necessary.  The amount you withdraw should be equal to what the education costs, which may be estimated by taking the budget that the school publishes minus grants and scholarships.  You should have all of those numbers before the first day of school.  This is amount $X. During the year, write all the checks out of your regular account.  At the end of the school year, you should expect to have no money left in the account.  I presume that the budget is exactly what you will spend.  If not, you might need to make a few adjustments, but this answer will presume you spend exactly $X during the fall and the spring of the next year. In order to get more out of the 529 without paying penalties, you are allowed to remove money without penalty, but having the gains taxed ($y + $z).  You have the choice of having the 529 funds directed to the educational institution, the student, or yourself.  If you direct the funds to the student, the gains portion would be taxed at the student's rate.  Everyone's tax situation is different, and of course there is a linkage between the parent's taxes and student's taxes, but it may be efficient to have the 529 funds directed to the student.  For instance, if the student doesn't have much income, they might not even be required to file income tax.  If that's the case, they may be able to remove an amount, $y, from the 529 account and still not need to file.  For instance, let's say the student has no unearned income, and the gains in the 529 account were 50%.  The student could get a check for $2,000, $1,000 would be gains, but that low amount may mean the student was not required to file. Or if it's more important to get more money out of the account, the student could remove the total amount of the grants plus scholarships ($y + $z).  No penalty would be due, just the taxes on the gains.  And at the student's tax rate (generally, but check your own situation). Finally, if you really want the money out of the account, you could remove a check ($y + $z + $p).  You'd pay tax on the gains of the sum, but penalty of 10% only on the $p portion. This answer does not include the math that goes along with securing some tax credits, so if those credits still are around as you're working through this, consider this article (which requires site sign-up).  In part, this article says: How much to withdraw -    ... For most parents, it will be 100% of the beneficiary’s qualified higher education expenses paid this year—tuition, fees, books, supplies, equipment, and room and board—less $4,000. The $4,000 is redirected to the American Opportunity Tax Credit (AOTC),... When to withdraw it -    Take withdrawals in the same calendar year that the qualified expenses were paid. .... Designating the distributee -    Since it is usually best that the Form 1099-Q be issued to the beneficiary, and show the beneficiary’s social security number, I prefer to use either option (2) or (3) [ (2) a check made out to the account beneficiary, or (3) a check made out to the educational institution] What about scholarships? -    The 10 percent penalty on a non-qualified distribution from a 529 plan is waived when the excess distribution can be attributed to tax-free scholarships. While there is no direct guidance from the IRS, many tax experts believe the distribution and the scholarship do not have to match up in the same calendar year when applying the penalty waiver. If you're curious about timing (taking non-penalty grants and scholarship money out), there is this link, which says you ""probably"" are allowed to accumulate grants and scholarship totals, for tax purposes, over multiple years."

negative: With a $40,000 payment there is a 100% chance that the owner will be claiming this as a business expense on their taxes.  The IRS and the state will definitely know about it, and the risk of interest and penalties if it is not claimed as income make the best course of action to see a tax adviser. Because taxes will not be taken out by the property owner, the tax payer should also make sure that the estimated $10,000 in federal taxes, if they are in the 25% tax bracket, doesn't trigger other tax issues that could result in penalties, or the need to file quarterly taxes next year. This kind of extra income could also result in a change or an elimination of a health care subsidy. A unexpected mid-year  change could trigger the need to refund the subsidy received this year via the tax form next April.

negative: If your landlord is OK with you subletting your apartment - then that's all that the landlord has to do with that. It doesn't really matter if the landlord is a private person or a publicly trade corporation/fund. No relevance at all. As to your own reporting - you're receiving rent. That is income to you. You can deduct the portion of your expenses (including rent) attributable to the area you rent out. All this goes to your Schedule E. Any positive remainder becomes your taxable income. Any deduction must be substantiated (i.e.: you'll have to keep all the receipts for all the expenses you used for the deduction for as long as the tax year is open, which is at least the next 3 years after filing).

negative: "You are doing Great! But you might want to read a couple of books and do some studying on budgeting and personal finance - education yourself now and you will avoid pain in the future. I learned a lot from reading Dave Ramsey's Total Money Makeover, and I have found some great advice from the simple budgeting guidelines on LearnVest. Budget in these three categories with these percentages, You may find that your ""essentials"" lower than 50%, because you are sharing room and utilities. You want to put as much into ""financial"" as you can for the first 1-2 years, to reduce (or eliminate) your student loan debt. Many folks will recommend you save six months (salary/expenses) for emergencies and unexpected situations. But understand that you are in debt now, and you have a unique opportunity to pay off your debt before your living expenses creep up (as they so often do). Since you are a contractor, put aside 2 months expenses (twice what I would normally advise), and then attack paying off your debts with passion. Since you have a mix of student loans, focus on paying them off by picking one at a time, paying the minimum against the others while you pay off the one you picked, then proceed to the next. Dave Ramsey advises a Debt Snowball, paying the smallest one first (psychological advantage, early wins), while others advise paying the highest interest off first. Since you have over $2400/month available to pay down debt, you could plan on reducing your student loan debt substantially in a year.  But avoid accumulating other debt along the way. Save for larger purchases. Your bedroom purchase may have been premature, but you needed some basics. But check your contract. Since many 0% furniture loan deals retroactively charge interest if you don't pay them off in full - you might want to make regular payments, and pay the debt off a month early (avoid any 'gotcha's). You might want to open a retirement account - many folks recommend a Roth account for folks your age - it is after tax, but you don't pay tax when you withdraw money. Roth is better when you have lots of deductions (think mortgage, kids). But some retirement account would be great to get started. Open a credit union account (if you can), that will make getting a credit card or personal loan (installment) easier. You want to build a credit file, but you don't want credit card debt (seems contradictory), so opening 2 credit cards over the next year will help your credit. You want a good credit mix (student loans, revolving, installment, and mortgage - wait on that one)."

negative: You are faced with a dilemma. If you use a 529 plan to fund your education, the short timeline of a few years will limit your returns that are tax free. Most people who use a 529 plan either purchase years of tuition via lump sum, when the child is young; or they  put aside money on a regular basis that will grow tax deferred/tax free. Some states do give a tax break when the contribution is made by a state taxpayer into a plan run by the state. The long term plans generally use a risk profile that starts off heavily weighted in stock when the child is young, and becomes more fixed income as the child reaches their high school years. The idea is to protect the fund from big losses when there is no time to recover. If you choose the plan with the least risk the issue is that the amount of gains that are being protected from federal tax is small. If you pick a more aggressive plan the risk is that the losses could be larger than the state tax savings. Look at some of the other tax breaks for tuition to see if you qualify Credits An education credit helps with the cost of higher education by   reducing the amount of tax owed on your tax return. If the credit   reduces your tax to less than zero, you may get a refund. There are   two education credits available: the American Opportunity Tax Credit   and the Lifetime Learning Credit. Who Can Claim an Education Credit? There are additional rules for each credit, but you must meet all   three of the following for either credit: If you’re eligible to claim the lifetime learning credit and are also   eligible to claim the American opportunity credit for the same student   in the same year, you can choose to claim either credit, but not both.   You can't claim the AOTC if you were a nonresident alien for any part   of the tax year unless you elect to be treated as a resident alien for   federal tax purposes. For more information about AOTC and foreign   students, visit American Opportunity Tax Credit - Information for   Foreign Students. Deductions Tuition and Fees Deduction You may be able to deduct qualified education expenses paid during the   year for yourself, your spouse or your dependent. You cannot claim   this deduction if your filing status is married filing separately or   if another person can claim an exemption for you as a dependent on his   or her tax return. The qualified expenses must be for higher   education. The tuition and fees deduction can reduce the amount of your income   subject to tax by up to $4,000. This deduction, reported on Form 8917,   Tuition and Fees Deduction, is taken as an adjustment to income. This   means you can claim this deduction even if you do not itemize   deductions on Schedule A (Form 1040). This deduction may be beneficial   to you if, for example, you cannot take the lifetime learning credit   because your income is too high. You may be able to take one of the education credits for your   education expenses instead of a tuition and fees deduction. You can   choose the one that will give you the lower tax.

negative: Do you need to incorporate? This depends on whether the company prefers you to be incorporated.  If you are going through a recruiting company, some of them are willing to deal with non-incorporated people (Sole Proprietor) and withhold taxes from your cheques for you. If you do want to incorporate, you can do it yourself, go through a paralegal, or you can even do it online.  I did mine in Ontario for about $300 (no name search - i just have a numbered corporation like 123456 Ontario Inc.) through www.oncorp.com - there are other sites that do it as well. Things to consider - if you're contracting through a corporation you most likely need to: Talk to an accountant about these for clarification - most of them will give you an initial consultation for free. Generally speaking, accountant fees for corporate filing taxes averages about $1000-2000 a year.

negative: Your phrasing of the question isn't very clear, but I believe you're asking: Does our total household income classify us as tax exempt? Or, can we avoid filing taxes if we make $22,500 or less per year? The answer is no. Your tax liability will be very low, and if you have dependents or other deductible expenses (mortgage interest, 401K contributions, etc.), you're likely looking at a close to $0 liability. You still have to file your taxes, and you can't claim exempt on your W-4. Even if you did qualify to be tax exempt, you still have to file taxes.

negative: How long you need to keep tax records will depend on jurisdiction. In general, if you discard records in a period of time less than your tax authority recommends, it may create audit problems down the road. ie: if you make a deduction supported by business expense receipts, and you discard those receipts next year, then you won't be able to defend the deduction if your tax authority audits you in 3 years. Generally, how long you keep records would depend on: (a) how much time your tax authority has to audit you; and (b) how long after you file your return you are allowed to make your own amendments. In your case (US-based), the IRS has straight-forward documentation about how long it expects you to keep records: https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records Period of Limitations that apply to income tax returns Keep records for 3 years if situations (4), (5), and (6) below do not apply to you. Keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later, if you file a claim for credit or refund after you file your return. Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction. Keep records for 6 years if you do not report income that you should report, and it is more than 25% of the gross income shown on your return. Keep records indefinitely if you do not file a return. Keep records indefinitely if you file a fraudulent return. Keep employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later. Note that the above are the minimum periods to keep records; for your own purposes you may want to keep them for longer periods than that. For example, you may be in a position to discover that you would like to refile a prior tax return, because you forgot to claim a tax credit that was available to you. If you would have been eligible to refile in that period but no longer have documentation, you are out of luck.

negative: I can only answer about the U.S. For question 2, I believe the answer is no. If you are a non-resident alien for tax purposes, then only income connected to the U.S. is reported as income on the tax return. Unless there were any non-deductible contributions to your pre-tax IRAs, when you convert to Roth IRA, the entire amount of the conversion is added to your income. So the tax consequence is the same as if you had that much additional U.S. income. If you are a non-resident alien with no other income in the U.S., then the income you have to report on your U.S. tax return will basically consist of the conversion. Non-resident aliens do not have a standard deduction. However, all people have a personal exemption. If we take 2013 as an example, the exemption is $3900 per person. We will assume that you will file as single or married filing separately (non-resident aliens cannot file as married filing jointly). The first $3900 of income is covered by the exemption, and is not counted in taxable income. For single and MFS, the next $8925 of income is taxed at 10%, then next $27325 of income is taxed at 15%, and so on. So if you convert less than the personal exemption amount every year ($3900 in 2013), then in theory you do not pay any taxes. If you convert a little bit more, then some of the conversion will be taxed at 10%, etc.

negative: Payment of taxes for your personal return filed with the IRS always come from your personal account, regardless of how the money was earned. Sales tax would be paid from your business account, so would corporate taxes, if those apply; but if you're talking about your tax payments to the IRS for your personal income that should be paid from your personal account. Also, stating the obvious, if you're paying an accountant to handle things you can always ask them for clarification as well. They will have more precise answers. EDIT Adding on for your last part of the question I missed:  In virtually all cases LLC's are what's called a pass through entity.  For these entities, all income in the eyes of the federal government passes directly through the entity to the owners at the end of each year.  They are then taxed personally on this net income at their individual tax rate, that's the very abridged version at least. The LLC pays no taxes directly to the federal government related to your income. Here's a resource if you'd like to learn more about LLC's: http://www.nolo.com/legal-encyclopedia/llc-basics-30163.html

negative: The IRS can direct your refund towards repayment of your unpaid taxes either on Federal or State/Local level. Whether it will depends on whether the State of New York will ask for it. Generally, if you owe taxes to New York for this year only, you would expect them to wait for you to file your State tax return and pay the taxes owed. If you don't - I'm pretty sure that the next year refund from the IRS will go directly to them.

negative: You mention only two debts, mortgage and student loan, but you mention $19K in savings, which suggests that you are a saver, and likely do not have other debts. You did not mention your (net) income and expenses (income statement), but since you have substantial savings, you likely live within your means (income > expenses).  Since you mention $38K in retirement, we might conclude you are regularly saving for retirement (are you saving 10% toward retirement)? You did not mention any medical condition or other debts, that might require a large savings, so I would suggest having 6 months savings ($2.5K x 6 = $15K) but should your net expenses be less, you might reduce this ($2K x 6 = $12K). You do not mention any investment you might want to make, but since you did not mention any candidate investments, we can assume you have no (specific) investments you find particularly attractive.  You did not mention anything you were saving to purchase that you might want to purchase. You have combined $19K + $50K = $69K savings, and $15K would be a comfortable emergency savings, leaving $54K you could use to reduce mortgage or student loan debt. The mortgage debt interest @4.5%, is higher, so paying that debt off would be like earning 4.5% guaranteed return on your money, tax-free.  At your income, your marginal tax rate is low enough that the mortgage interest deduction (if you do itemize) would not reduce this return much (15% if you itemize). The student loan debt interest @2.8%, would be like earning 2.8% guaranteed return on your money, tax-free. Clearly the higher return on your 'investment' in paying off debt would be reducing your mortgage balance (over 50% higher return on investment, compared to the student loan debt). You did not mention any circumstance that might cause the student loan rate to increase, the mortgage rate to increase, nor did you mention any difficulty making both the mortgage and student loan payments, the amounts of either payment, nor the number of years remaining to pay on either. Should you need (or desire) to reduce your payments, you could choose to payoff the student loan to eliminate one payment, and thus decrease your expenses.  Or you could choose to pay down the mortgage, and refinance (or refactor) the mortgage to obtain a smaller payment.  Another strategy (assuming you have had your house for 5-7 years), might be to pay the mortgage down enough to refinance into a 15 year loan, and (assuming you have a good credit score) obtain a lower (3%) rate. But I am going to suggest you consider a blended approach.  Combine the Dave Ramsey Debt Snowball approach with the reduce the interest rate approach.  Take the $54K ($57K?) available (after reserving 6 months emergency fund), and split between both.  You pay your mortgage down by $27K and your student loan debt down by $27K.  Your blended return on investment is (2.8+4.5)/2 = 3.65%, and you have the following Balance Sheet: Assets: Debts: The next steps would be to, There are two great reasons for paying off the student loan debt. One is the Dave Ramsey Debt Snowball approach which is that this is the smaller debt, and thus represents a psychological win, and the other is that student loan debt has special treatment even in bankruptcy.

negative: In an accounting position, a domain name would fall under an intangible asset. Copyrights and patents are intangible, while tangible assets would be buildings or land (also known as property, plant, and equipment).  Noting above, you can list it as an expense for personal reasons, but that would be poor classification. Tangible and intangible assets come with expenses such as legal fees and design. In these instances, you would expense the cost, or fee, but add back that value to the tangible or intangible as it would be considered maintenance.  Please read here for tax treatment of a domain name.  Please read here for what an intangible asset is. Also read here on page 11 for more clarification by IFRS.

negative: With your income so high, your marginal tax rate should be pretty easy to determine.  You are very likely in the 33% tax bracket (married filing jointly income range of $231,450 to $413,350), so your wife's additional income will effectively be taxed at 33% plus 15% for self-employment taxes. Rounding to 50% means you need to withhold $19,000 over the year (or slightly less depending on what business expenses you can deduct). You could use a similar calculation for CA state taxes. You can either just add this gross additional amount to your withholdings, or make an estimated tax payment every quarter.  Any difference will be made up when you file your 2017 taxes. So long as you withhold 100% of your total tax liability from last year, you should not have any underpayment penalties.

negative: There actually are legitimate reasons, but they don't apply to most people.  Here are a few that I know of: You're self-employed and have to pay quarterly estimated taxes.  Rather than wait for the refund when you already have to pay 1/4 of next year's taxes at the same time, you just have the IRS apply to refund forward.  (so you're not out the money you owe while waiting for your refund). You're filing an amended or late return, and so you're already into the next year, and have a similar situation as #1, where your next year's taxes have already come due. You're planning on declaring bankruptcy, and you're under the Tenth Circuit, those credits might be safe from creditors For almost any other situation, you're better off taking the money, and using it to pay down debt, or put it somewhere to make interest (although, at the current rates, that might not be very much).

negative: Your mother can give you $14k and your wife $14k (every year) without creating a gift-tax filing requirement, anything in excess of that and she will have to file form 709 with her tax return, but she will not have gift tax liability on her end unless her lifetime gift tax exemption (currently $5.49M) has been exhausted. As the recipients of the gift, you have no tax liability or reporting requirement. So the easiest method would be for her to write you and your wife each checks for $14k. Since it's almost the end of the year, she could give you the extra $2k next year if needed, that smaller amount would not likely need to 'season' for loan approval. Since you mentioned only your mother, I assumed it's just her, but if your mother is married, both her and her spouse could each give you and your wife  $14k without creating a filing requirement, so up to $56k in gifts from one couple to another, or $28k from one party to a couple. It doesn't have to be a spouse, that's just the typical scenario.

negative: Graduating from college is probably one of the most fulfilling triumphs you’ll ever achieve in your entire life. However, that joy also brings bigger responsibilities in life that could affect tax time too. This specific time in your life will have a lot to offer and before the winds of change take you to wherever you dream of, here are some advices from [Southbourne Tax Group](http://www.thesouthbournegroup.com/) to make your taxes easier where you can get a refund during filing time and save money as well.  If your modified adjusted gross income is below $80,000 and you’re single, up to $2,500 of the interest portion of your student loan payments can be tax deductible, and below $160,000 for married person filing jointly.   Job hunting expenses can be tax deductible too but there are exceptions such as expenses involved in your search for a new job in a new career field and working full-time for the first time. Major tax breaks are expected in case you are moving to a new and different city for your first job.    Get a jump start on retirement savings with your company’s 401(k). Each year, you can secure up to $18,000 from your income taxes by contributing on one. If you have a family coverage, you could secure $6,750 from contributing to a health savings account in case you are enrolled in a high-deductible health plan. And if you are single, you can secure up to $3,400. Placing your money into a flexible spending account could keep an added $2,600 out of your taxable income.    Getting big deductions for business expenses is possible if you are planning to be a freelancer or to be your own boss as a new college graduate. Southbourne Group also advises saving at least 25% of what you’re earning for the IRS.   Research more about lifetime learning credit and understand its importance. You can claim up to $2,000 of a tax credit for post-secondary work at eligible educational institutions. This is possible if your adjusted gross income is below $65,000 as a single filer, or below $131,000 as a married person filing jointly.  Saving money has a lot of benefits and one of which is cutting your tax bill. If you’re a married person filing jointly and have an adjusted gross income of less than $62,000, you may qualify for the saver’s credit, while for a single filer, it should be below $31,000. That can reduce your tax bill by up to 50% of the first $2,000 if you’re a single filer, or $4,000 if you’re a married person filing jointly you contribute to an eligible retirement plan.   Southbourne Tax Group doesn’t want you to overspend on tax software and getting professional help in this regard. The firm suggests using the free packages from trusted tax software companies if your tax situation is quite simple. Get that professional help at Volunteer Income Tax Assistance program, which can help you meet with a pro at little or no cost.

negative: As others have said, make sure you can and do file your taxes on a cash basis (not accrual). It sounds like it's very unlikely the company is going to issue you a 1099 for invoices they never paid you. So you just file last year's taxes based on your income, which is the money you actually received. If they do pay you later, in the new year, you'll include that income on next year's tax return, and you would expect a 1099 at that time. Side note: not getting paid is unfortunately common for consultants and contractors. Take the first unpaid invoice and sue them in small claims court. After you win (and collect!), tell them you'll sue them for each unpaid invoice in turn until they pay you in full. (You might need to break up the lawsuits like that to remain under the small claims limit.)

negative: If the fee is paid directly from the account, then unfortunately no, you can not deduct it. It's probably too late now, but in the future you can ask the financial institution if they will allow you to write them a separate check to cover the fees. If they allow that then you can preserve your tax free account balance, and potentially deduct the fees too. More details here. Update: as discussed in the comments below, a strict interpretation of the IRS description of deductible investment expenses may not include expenses for a Roth IRA, even if they are paid outside of the account. However, there seems to be conflicting interpretations of this IRS rule, so I would advise speaking to an accountant or the IRS directly for clarification. But even if you determine you cannot deduct the fees, paying for them outside of the Roth is still a good idea because it enables you to maintain a higher balance in your tax advantaged account.

negative: If you withdraw money from an RRSP, you are taxed on that money as ordinary income and will have to pay withholding taxes, and potentially more income tax when you file. Additionally, you lose that contribution amount. If you subsequently deposit the same gross amount into another RRSP at a different bank, that will lower your taxable income for the year and you'll subsequently be able to recover the withholding taxes, but you will have permanently lost the contribution room. For example, you have $100,000 in RRSP contribution room. You buy $1,000 in RRSPs from Bank A. This leaves you with $99,000 in RRSP contribution room. Next year, you withdraw that $1,000 and deposit it in Bank B in an RRSP account. Now, you have $98,000 in RRSP contribution room. Chances are good that Bank A withheld 15% for taxes, but when you file your tax return, you'll get that back. Your withdrawal and subsequent purchase of RRSPs in the tax year cancel out. Far better is to transfer the RRSP from Bank A to Bank B. That has no tax implications and would not affect your RRSP contribution limit. Not all banks are willing to do this, though.

negative: "Your corporation would file a corporate income tax return on an annual basis. One single month of no revenue doesn't mean much in that annual scheme of things. Total annual revenue and total annual expenses are what impact the results. In other words, yes, your corporation can book revenues in (say) 11 of 12 months of the year but still incur expenses in all months. Many seasonal businesses operate this way and it is perfectly normal. You could even just have, say, one super-awesome month and spend money the rest of the year. Heck, you could even have zero revenue but still incur expenses—startups often work like that at first. (You'd need investment funding, personal credit, a loan, or retained earnings from earlier profitable periods to do that, of course.) As long as your corporation has a reasonable expectation of a profit and the expenses your corporation incurs are valid business expenses, then yes, you ought to be able to deduct those expenses from your revenue when figuring taxes owed, regardless of whether the expenses were incurred at the same approximate time as revenue was booked—as long as the expense wasn't the acquisition of a depreciable asset. Some things your company would buy—such as the computer in your example—would not be fully deductible in the year the expense is incurred. Depreciable property expenses are deducted over time according to a schedule for the kind of property. The amount of depreciation expense you can claim for such property each year is known as Capital Cost Allowance. A qualified professional accountant can help you understand this. One last thing: You wrote ""write off"". That is not the same as ""deduct"". However, you are forgiven, because many people say ""write off"" when they actually mean ""deduct"" (for tax purposes). ""Write off"", rather, is a different accounting term, meaning where you mark down the value of an asset (e.g. a bad loan that will never be repaid) to zero; in effect, you are recognizing it is now a worthless asset. There can be a tax benefit to a write-off, but what you are asking about are clearly expense deductions and not write-offs. They are not the same thing, and the next time you hear somebody using ""write off"" when they mean ""deduction"", please correct them."

negative: "As Mr. Money Money Mustache once said: IF YOU HAVE CREDIT CARD DEBT, YOU SHOULD FEEL LIKE YOUR HAIR IS ON   FIRE Student loan debt is different than credit card debt.  Rather than having spent the money on just about anything, it was invested in improving yourself and probably your financial future.  This was probably a good decision. However, unlike most credit card debt, if you ever have to file for bankruptcy, your student loans will not be erased.  They will follow you forever. Pay your debts off as quickly as you can.  While it may be true that ""long-term return on the stock market is about 7%"", you cannot assume that this will always be the case, especially in the short term.  What if you had made this assumption in 2007? To assume that your stocks will beat a 6.4% guaranteed return over the next few years is not really investing.  It's gambling."

negative: Your recruiter is likely trying to avoid having to pay the employer's side of employment taxes, and may even be trying to avoid having to file a 1099 for you by treating your relationship as a vendor/service provider that he is purchasing services from, which would make your pay just a business expense. It's definitely in his best interest for you to do it this way. Whether it's in your best interest is up to you. You should consult a licensed legal/tax professional to help you determine whether this is a good arrangement for you. (Most of the time, when someone starts playing tax avoidance games, they eventually get stung by it.) The next big question: If you already know this guy is a snake, why are you still working with him? If you don't trust him, why would you take legal/tax advice from him? He might land you a high-paying job. But he also might cause you years of headaches if his tax advice turns out to be flawed.

negative: All you personal virtue folks need to realize that as students are crushed under every greater debt loads, in the context of flat wages and a mediocre economy BEFORE the next crash, it will harm the greater economy and you.   No matter how awesome YOU are, students carrying trillions in debt will be folks who can't buy homes and spend a lot less on other things.  Unless you work for a student loan lender, that can hit you too down the road.  A bad economy is bad for all.  The cost of University has spiraled out of control and to absurdly expensive levels, student debt is a society wide problem that will affect the virtuous and the repulsive alike.  Get over yourselves.

negative: Congratulations on starting your own business. Invest in a tax software package right away; I can't recommend a specific one but there is enough information out there to point you in the right direction: share with us which one you ended up using and why (maybe a separate question?) You do need to make your FICA taxes but you can write off the SE part of it. Keep all your filings as a PDF, a printout and a softcopy in the native format of the tax software package: it really helps the next tax season. When you begin your business, most of the expenses are going to be straightforward (it was for me) and while I had the option of doing it by hand, I used software to do it myself. At the beginning, it might actually seem harder to use the tax software package, but it will pay off in the end. Build relationships with a few tax advisors and attorneys: you will need to buy liability insurance soon if you are in any kind of serious (non hobby) business and accounting for these are no trivial tasks. If you have not filed yet, I recommend you do this: File an extension, overpay your estimated taxes (you can always collect a refund later) and file your return once you have had a CPA look over it. Do not skimp on a CPA: it's just the cost of running your business and you don't want to waste your time reading the IRS manuals when you could be growing your own business. Best of luck and come back to tell us what you did!

negative: Yes, very.  Opening a Roth - there is a limit of $5000 ($6000 if age 50 or older) for the year as well as a phaseout based on income, starting at $105K if single, $167K if married filing joint. Of course, this is for a new deposit, the choice is this or the conversion I discuss next... Conversion - there is no income limit. Taxes are due on the amount converted, either as income in 2010 or half the amount as income in each of '11 and '12. If any IRA money was not deducted, you add all IRA money and pro-rate the amount converted so it's not taxed twice.

negative: Welcome to the wonderful but oft confusing world of self-employment. Your regular job will withhold income for you and give you a W2, which tells you and the government how much is withheld.  At the end of the year uber will give you and the government a 1099-misc, which will tell you how much they paid you, but nothing will be withheld, which means you will owe the government some taxes. When it comes to taxes, you will file a 1040 (the big one, not a 1040EZ nor 1040A).  In addition you will file a schedule C (self-employed income), where you will report the gross paid to you, deduct your expenses, and come up with your profit, which will be taxable.  That profit goes into a line in the 1040.   You need to file schedule SE.  This says how much self-employment tax you will pay on your 1099 income, and it will be more than you expect.  Self employment tax is SS/Medicare.  There's a line for this on the 1040 as well.  You can also deduct half of your self-employment tax on the 1040, there's a line for it. Now, you can pay quarterly taxes on your 1099 income by filing 1040-ES.  That avoids a penalty (which usually isn't that large) for not withholding enough.  As an alternative, you can have your regular W2 job withhold extra.  As long as you don't owe a bunch at tax time, you won't be a fined. When you are self-employed your taxes aren't as simple.  Sorry.  You can either spend some time becoming an expert by studying the instructions for the 1040, pay for the expensive version of tax programs, or hire someone to do it for you. Self-employed taxes are painful, but take advantage of the upsides as well.  You can start a solo 401(k) or SEP IRA, for example.  Make sure you are careful to deduct every relevant business expense and keep good records in case you get audited.

negative: "First, filing status. If you and your wife are legally married, you should be filing your tax returns as married, either jointly or separately. In the US, ""head of household"" has a specific meaning and is for unmarried people who are supporting one or more relatives, per the IRS. If you are working full-time and your wife is not, then likely you will file a joint return, including all your income and all the expenses for your wife's business. So yes, the losses in her business will offset your income. Depending on how complex things are, you may want to hire a professional to help with your taxes. The rules for what can and cannot be deducted as a business expense can be opaque."

negative: Assuming the amount of your car payment and student loan aren't crazy you should be fine. I would suggest starting with a baseline budget listing your monthly income and expenses. Be sure to include miscellaneous expenses like car maintenance, insurance, food, clothes, etc (the common things that sometimes get overlooked in a budget). After all of your necessary expenses (fluff like entertainment doesn't count), if your employer has a 401k with a match I would contribute to that up to the match amount.  Next I would save an emergency fund to cover unforseen events such as car repairs, etc. $1000 is not an uncommon amount to see people suggest for this. Next I would knock out your car loan then student loan as fast as possible. This will free up some cash flow which gives you more freedom to do what you want. At this point you save more so you don't have to finance the next car or have a down payment for a home or whatever.  Building your savings to be 3-6 months of income is a good idea, this covers things like being laid off or other larger unexpected events. After you get to that point how you handle your budget is pretty open.

negative: We don't have all the relevant numbers to give you the perfect answer. Knowing your income is pretty important for this question, but, since you have 200K in student loans, I'm going to guess (and hope) you probably make more than 80K/yr which is the cutoff for deducting student loan interest. (It starts phasing out once you make over 65K and fully phases out at 80K, or 160K if you're married.) Even if you make less than 65K, you can only deduct a max of 2500/yr in student loan interest and you'll be maxing that out for at least the next 4 years. So, my take is: Throw it at the student loan. Your mortgage interest is (probably) fully deductible, which means your mortgage interest rate is effectively reduced by your tax bracket. E.g. if you are in the 28% tax bracket a 4% mortgage rate would effectively become 2.88%. Outside of that, if you were to make minimum payments on your mortgage and student loans starting now, as soon as your student loan is paid off I would start making that same student loan payment amount towards your mortgage. This way you won't have any change in cash flow, but it will significantly lower the term of your mortgage. (Which is what would happen if you choose to pay down the mortgage now, but then you don't get the tax advantage on the difference.)

negative: Please direct personal finance questions to /r/personalfinance  However, my opinion is that you are unlikely to earn more than 7% annualized returns from any combination of asset offerings in your 401k over the next several years; therefore, you should pay off your student loans first. I am ignoring tax consequences, but /r/personalfinance may be able to provide a more quantitative answer.

negative: "First to clear a few things up.   It is definitely not a gift. The people are sending you money only because you are providing them with a service.   And for tax purposes, it is not a ""Donation"". It has nothing to do with the fact that you are soliciting the donation, as charitable organizations solicit donations all the time. For tax purposes, it is not a ""Donation"" because you do not have 501(c)(3) non profit status.   It is income. The question is then, is it ""Business"" income, or ""Hobby"" related income?   Firstly, you haven't mentioned, but it's important to consider, how much money are you receiving from this monthly, or how much money do you expect to receive from this annually?   If it's a minimal amount, say $50 a month or less, then you probably just want to treat it as a hobby. Mostly because with this level of income, it's not likely to be profitable. In that case, report the income and pay the tax. The tax you will owe will be minimal and will probably be less than the costs involved with setting up and running it as a business anyway. As a Hobby, you won't be able to deduct your expenses (server costs, etc...) unless you itemize your taxes on Schedule A.   On the other hand if your income from this will be significantly more than $600/yr, now or in the near future, then you should consider running it as a business.   Get it clear in your mind that it's a business, and that you intend it to be profitable. Perhaps it won't be profitable now, or even for a while. What's important at this point is that you intend it to be profitable.   The IRS will consider, if it looks like a business, and it acts like a business, then it's probably a business... so make it so.   Come up with a name for your business. Register the business with your state and/or county as necessary in your location. Get a bank account for your business. Get a separate Business PayPal account. Keep personal and business expenses (and income) separate.   As a business, when you file your taxes, you will be able to file a Schedule C form even if you do not itemize your taxes on Schedule A. On Schedule C, you list and total your (business) income, and your (business) expenses, then you subtract the expenses from the income to calculate your profit (or loss).   If your business income is more than your business expenses, you pay tax on the difference (the profit).  If your business expenses are more than your business income, then you have a business loss. You would not have to pay any income tax on the business income, and you may be able to be carry the loss over to the next and following years. You may want to have a service do your taxes for you, but at this level, it is certainly something you could do yourself with some minimal consultations with an accountant."


query: Transferring money from 403B to 401K?

positive: "You can move money from a 403b to a 401k plan, but the question you should ask yourself is whether it is a wise decision. Unless there are specific reasons for wanting to invest in your new employer's 401k (e.g. you can buy your employer's stock at discounted rates within the 401k, and this is a good investment according to your friends, neighbors, and brothers-in-law), you would be much better off moving the 403b money into an IRA, where you have many more choices for investment and usually can manage to find investments with lower investment costs (e.g. mutual fund fees) than in a typical employer's 401k plan. On the other hand, 401k assets are better protected than IRA assets in case you are sued and a court finds you to be liable for damages; the plaintiff cannot come after the 401k assets if you cannot pay.  To answer the question of ""how?"", you need to talk to the HR people at your current employer to make sure that they are willing to accept a roll-over from another tax-deferred plan (not all plans are agreeable to do this) and get any paperwork from them, especially making sure that you find out where the check is to be sent, and to whom it should be payable. Then, talk to your previous employer's HR people and tell them that you want to roll over your 403b money into the 401k plan of your new employer, fill out the paperwork, make sure they know to whom to cut the check to, and where it is to be sent etc. In my personal experience, I was sent the check payable to the custodian of my new (IRA) account, and I had to send it on to the custodian; my 403b people refused to send the check directly to the new custodian. The following January, you will receive a 1099-R form from your 403b plan showing the amount transferred to the new custodian, with hopefully the correct code letter indicating that the money was rolled over into another tax-deferred account."

negative: I assume that with both companies you can buy stock mutual funds, bonds mutual funds, ETFs and money market accounts. They should both offer all of these as IRAs, Roth IRAs, and non-retirement accounts.  You  need to make sure they offer the types of investments you want. Most 401K or 403b plans only offer a handful of options, but for non-company sponsored plans you want to have many more choices. To look at the costs see how much they charge you when you buy or sell shares. Also look at the annual expenses for those funds. Each company website should show you all the fees for each fund. Take a few funds that you are likely to invest in, and have a match in the other fund family, and compare. The benefit of the retirement accounts is that if you make a less than perfect choice now, it is easy to move the money within the family of funds or even to another family of funds later. The roll over or transfer doesn't involve taxes.

negative: "Sometimes 403b's contain annuities or other insurance related instruments.  I know that in many New York schools the local teacher unions administer the 403b plan, and sometimes choose proprietary investments like variable annuities or other insurance products. In New York the Attorney General sued and settled with the state teacher's union for their endorsement of a high cost ING 403b plan -- I believe the maintenance fees were in excess of 3%/year!  In a tax deferred plan like a 401k, 403b or 457 plan, the low risk ""insurance fund"" is generally a GIC ""Guaranteed Investment Contract"". A GIC (aka ""Stable Value Fund"") is sort of cross between a CD and a Money Market fund. It's used by insurance companies to raise short term capital. GICs usually yield a premium versus a money market and are a safe investment. If your wife is in a 403b with annuities or other life-insurance tie ins other than GICs, make sure that you understand the fee structure and ask lots of questions."

negative: Both will grow at the same rate. If everything else was equal:fees, investment options, flavor (Roth or deductible); Then I would put the money into the 403B.  Why? putting the money into the 403b directly from your paycheck during the year allows you to have all of the $5,500 available to make an end of the year contribution, or to put the money from your tax return into the IRA. While $4,800 is less than $5,500. it is close enough that If you realized late in the calendar year that you had an extra $1,000 you wanted to contribute to your retirement, there wouldn't be enough room left to contribute.

negative: Most 401k plans (maybe even all 401k plans as a matter of law) allow the option of moving the money in your 401k account from one mutual fund to another  (within the group of funds that are in the plan).  So, you can exit from one fund and put all your 401k money (not just the new contributions) into another fund in the group if you like.  Whether you can find a fund within that group that invests only in the companies that you approve of is another matter. As mhoran_psprep's answer points out, changing investments inside a 401k (ditto IRAs, 403b and 457 plans) is without tax consequence which is not the case when you sell one mutual fund and buy another in a non-retirement account.

negative: Kudos to you on having money in a retirement account as early as after college.  Many people don't start investing towards retirement until far to late and compound interest makes a major difference in those early years. Ideally, neither withdraw nor borrow from these accounts.  Withdrawing from your 403b will incur a 10% penalty unless you are over the minimum age on top of the normal tax on that income.  With a 401K loan you're putting yourself at risk if you run into a situation where you can't pay the loan back of incurring the same penalties as an early withdrawal.  This article covers the concerns well. In general, you want to view your retirement money as untouchable until the distributions need to start coming in retirement.  It's your future in there. Of course, this doesn't help the short term cash need.  Do you have money in an emergency fund somewhere?  Could a relative loan you money?  Can you move to a less expensive place in advance and squirrel away some of what would have been your rent cash?  Can you cut back to bare necessities and do the same?  Do you have some nice stuff sitting around that you could sell to make up that needed cash?  Will your current employer pay out unused vacation or are you getting any severance from this situation?  Will you qualify for unemployment? I other words, think about what you would do to get the money if your retirement accounts weren't there.  Then do that - as long as it's legal and doesn't involve running up debt on high interest lines of credit - instead of borrowing against your future.

negative: "Assuming you are below retirement age, you typically cannot roll money from a Roth IRA into a 401k nor transfer money out of a 401k until you leave the company. Your best bet is to leave your exising roth ira separate from your 401k.  A good strategy for retirement accounts is whenever able (typically when you switch jobs) roll your 401k into a ""rollover IRA"" (not a roth).   Then you can manage your investments with more options than the 5-20 funds provided in the 401k.   I would recommend against rolling funds into a 401k because of the lack of options in most 401k plans. Also, 401k is pre-tax and Roth is post-tax.   Pre and post tax investments don't mix before withdrawal unless you do a conversion of some kind."

negative: "Good question.  And it depends a bit on your current plan, your future income, and the plan you are moving too. Mostly you want to roll out of your existing 401K.  There will likely be a fee, and your investment choices are limited.  You will want to do a direct transfer, and going with a quality company such as Fidelity or Vanguard.  Both of those have zero fees for accounts and pretty good customer service. However, if your future income is likely to be high there is something else to consider.  If you are over the limits do a ROTH, and are considering doing a ""Backdoor ROTH"" a key success for this strategy is keeping your roll over IRA balance low (or zero).   So you may want to either leave the 401K where it is, or roll it to your new 401K plan.  In that case you will have to call the two 401K custodians, and select the best choice as far as fees and fund choice."

negative: If you leave your job with money that you contributed to the 401K, the company will have a policy about whether you can leave the money in the 401K or whether you must take it with you.  I have normally seen that if it is a small amount, then it must be taken and if it is over a certain amount (maybe $10K) then you have the option of leaving it in the account or taking it out. If you take it out, then you should contact a brokerage first and get instructions from them for how to have it transferred into a rollover account to avoid having to pay tax.  If the company makes the check out to you or transfers money into a non-retirement account, then they will very easily cause a taxable event and they will likely withhold tax from the payment.   If you leave the money in the 401K after you leave, you will generally have fewer investment choices, higher fees, and you may have higher risks.  Occasionally companies in hard times fraudulently raid their 401K accounts and when this happens it can be very difficult to get it back. (For examples see the Dept Of Labor page at http://www.dol.gov/ebsa/newsroom/criminal/main.html and look for 401k or retirement in titles). As far as having the money invested for several years, that time can be your friend if you get a reasonable rate of return.  Over 30 years your money should be able to double multiple times.  (At 8% return it will take less than 10 years to double the money. [see http://buyupside.com/calculators/doublemoneyfeb08.htm])

negative: "I would create a ""Rollover IRA"".   These IRAs are designed to take funds from a 401k and allow you to invest them without incurring a cash out penalty nor a tax due.   You will have more choices than if you leave it at your old 401k. If you cash out the 401k, you'll have much less to invest ($1500 - penalty - taxes) vs. doing a rollover 401k where you'll still have $1500 to invest. Then, once the money is inside the new Rollover IRA you can invest in whatever you please.   If you want to invest in Vanguard funds, I recommend opening the Rollover IRA at Vanguard.  Here is Vanguard's information page about rollovers from 401ks: https://investor.vanguard.com/what-we-offer/401k-rollovers/401k-403b-to-ira-rollover-benefits When you next change jobs and have another 401k with funds in it, you can roll it into the same Rollover IRA."

negative: The time horizon for your 401K/IRA is essentially the same, and it doesn't stop at the day you retire. On the day you do the rollover you will be transferring your funds into similar investments. S&P500 index to S&P 500 index; 20xx retirement date to 20xx retirement date; small cap to small cap... If your vested portion is worth X $'s when the funds are sold, that is the amount that will be transferred to the IRA  custodian or the custodian for the new employer. Use the transfer to make any rebalancing adjustments that you want to make. But with as much as a year before you leave the company if you need to rebalance now, then do that irrespective of your leaving. Cash is what is transferred, not the individual stock or mutual fund shares. Only move your funds into a money market account with your current 401K if that makes the most sense for your retirement plan. Also keep in mind unless the amount in the 401K is very small you don't have to do this on your last day of work. Even if you are putting the funds in a IRA wait until you have started with the new company and so can define all your buckets based on the options in the new company.

negative: Companies usually have a minimum account balance required to keep a 401k for former employees. You will have to check whether $10k is sufficient to keep your funds in your former employer's 401k. If you are below their threshold, you will have to move your money. One option is to rollover into the new employer's 401k.  You can rollover a 401k into a traditional IRA account that is independent of your employer. A traditional IRA has the same tax benefits as a 401k; it grows tax-free until you withdraw money from the account. Companies that offer IRAs include Vanguard, Fidelity, TIAA.  Many companies have significant overhead costs in the their 401k management. It may be better for you to rollover your money into an IRA to save on these costs.  I am not knowledgeable about loaning from retirement accounts, so I cannot help with that.

negative: Do you think your 403b will earn more than the mortgage interest rate?  If so, then mortgage seems the way to go. Conservative investment strategies might not earn much more than a 3-4% mortgage, and if you're paying 5-6% it's more likely you'll be earning less than the mortgage. From another point of view, though, I would probably take a loan anyway just from a security standpoint - you have more risk if you put a third of your retirement savings into one purchase directly, whereas if you do a 10-15 year loan, you'll have more of a cushion.  Also, if you don't outlive the mortgage, you'll have had use of more of your retirement income than otherwise - though I do wonder if it puts you at some risk if you have significant medical bills (which might require you to liquidate your 403b but wouldn't require you to sell your house, so paying it off has some upside). Also, as @chili555 notes in comments, you should consider the taxation of your 403(b) income.  If you pull it out in one lump sum, some of it may be taxed at a higher rate than if you pulled it out more slowly over time, which will easily overwhelm any interest rate differences.  This assumes it's not a Roth 403(b) account; if it is Roth then it doesn't matter.

negative: No that is not a rollover. Many employees have experienced a change of management companies. Sometimes these switches are due to a merger, an acquisition, or just to save money. It is understandable that the old employer would like to see you transfer your funds to either your new employer, or roll them over into a IRA/Roth IRA. So it is not unexpected that they will take this opportunity to nudge you.  The thing that congress was trying to prevent were serial rollovers of IRAs. These people would use the 60 day window to have in essence a loan. Some would do this multiple times a year; always making sure they replaced the money in time.  The IRA One-Rollover-Per-Year Rule Beginning in 2015, you can make only one rollover from an IRA to   another (or the same) IRA in any 12-month period, regardless of the   number of IRAs you own (Announcement  2014-15 and Announcement   2014-32). The limit will apply by aggregating all of an individual’s   IRAs, including SEP and SIMPLE IRAs as well as traditional and Roth   IRAs, effectively treating them as one IRA for purposes of the limit. Direct transfers of IRA money are not limited This change won’t affect your ability to transfer funds from one IRA   trustee directly to another, because this type of transfer isn’t a   rollover (Revenue Ruling 78-406, 1978-2 C.B. 157). The   one-rollover-per-year rule of Internal Revenue Code Section   408(d)(3)(B) applies only to rollovers. Note that the law doesn't mention 401K/403B or the federal TSP. When the 401K changes management companies that is not a rollover.

negative: The maximum you can contribute to both the 403(b) and 401(k) is $18,000. Take the amount you already contributed and subtract it from $18,000. That's how much you have left to contribute before maxing out.

negative: From your first link: IRS.gov: IRA One-Rollover-Per-Year-Rule IRA One-Rollover-Per-Year Rule Beginning in 2015, you can make only one rollover from an IRA to   another (or the same) IRA in any 12-month period, regardless of the   number of IRAs you own (Announcement  2014-15 and Announcement   2014-32). The limit will apply by aggregating all of an individual’s   IRAs, including SEP and SIMPLE IRAs as well as traditional and Roth   IRAs, effectively treating them as one IRA for purposes of the limit. They are limiting your ability to roll over money from an IRA to an IRA. You are looking to go from a 401K to an IRA. That is fine. The idea was that some people were taking all money from their IRA, using it for almost 60 days, then putting it back into an IRA. Thus getting a sort of short term loan. They could do this multiple times in a year. The direct trustee-to-trustee transfer are exempt from the once per year rule because the money is never in your possession.  Moving money from a 401K/403b/TSP plan from your former employer to an IRA or Roth IRA is fine, and isn't limited to once per year.

negative: Transfers can be made from U.S. pension plans to Canadian RRSPs, if the following conditions are met: Way more details here: http://www.howlandtax.com/answers/05Sept21.htm And googling 'transfer 401k to rrsp' yields much fruit.

negative: For such a small amount, I really don't think it's worth the time and effort to withdraw it. Why not roll it over into a traditional IRA or a new 401k / 403b?

negative: "Rolling an old 401k into a new 401k is generally only for ease of management. For example, how many bank accounts do you really want? As long as the funds are reasonably allocated I've found it can be a useful ""mind game"" to leave it separate. Sometimes it's desirable to ignore an account and let it grow, and it is a nice surprise when finally adding all the account balances together. In other words, I keep thinking I've got X (the amount of my biggest or current 401k), which affects/helps my habits and desire to save. When I add them all together I'm shocked to find out I've got Y (the total of all accounts). Personally, I've had big paperwork problems transferring an old 403b (same type process as 401k) even when I had an adviser helping me move it. In the end it was worth moving it, because I'm having the adviser manage it. I'm actually writing this answer specifically because I recently moved a big 401k into a Traditional IRA. A rep from the brokerage, representing my previous employer, kept calling me to find out how they could help (I didn't brush him off). I found that using an IRA provided me with the opportunity to do self-guided investments in funds or even individual stocks, well beyond the limited selection of the old company's 401k. It was useful/interesting to me to invest in low-fee vehicles such as index funds (ie: the Buffett recommendation), and I'll find some stocks as well. Oh and when the old company 401k has certain funds being discontinued, I didn't want to notice the mandated changes years later. So, I'd suggest you consider management and flexibility of the 401k or equivalent, and any of your special personal circumstances/goals. If you end up with a few retirement accounts, I suggest you use an account aggregating website to see or follow your net worth. I know many who, based on various concerns and their portfolio, find an acceptable website to use."

negative: A 401k plan will ask you to name a beneficiary who will receive the funds if you don't withdraw them all before death. Usually, a primary beneficiary and a secondary beneficiary is requested. If you don't specify a beneficiary, your estate is the beneficiary by default.  Note that the name supplied to the 401k plan is who will get the money, and you cannot change this by bequeathing the money in your will. For example, if you neglected to change the beneficiary upon divorce, it is useless to say in your will that the money in the 401k plan goes to your new wife; the 401k plan will give it to your ex-wife who still remains the beneficiary of your 401k Money in a 401k plan is what is called income with respect to a decedent (IRD)  on which income tax is levied, and it is also is part of your estate and thus liable to be subject to estate tax.  The latter is true even if the 401k plan assets are not mentioned anywhere in your will, and even if the assets got sent to your ex-wife which is not what you wanted to have happen.  There are various estate tax exceptions for spouse beneficiaries (no  estate tax due now, but will be charged when the spouse passes away). With regard to income tax, the beneficiaries of a 401k plan (similarly IRAs, 403b plans etc) generally get to take the whole amount and pay the income  tax themselves. Edit in response to littleadv's comments: Each 401k plan is different, and some plans, especially the smaller ones, may prefer to distribute the  401k assets as a lump sum rather than allow the beneficiaries to withdraw  the money over several years (and pay income tax on the amount withdrawn each year). This is because there are far too many rules and regulations to trip over when making withdrawals over several years. The lump sum distribution can be transferred into a newly established  Inherited IRA (see the Nolo article linked to in @littleadv's answer for some details and some pitfalls to avoid) and the income tax is thus deferred until withdrawals occur.  Spouse  beneficiaries are entitled to more generous rules than non-spouse  beneficiaries. If your heirs are otherwise well provided for and you are in a  philanthropic mood (or you don't want to give 'em a dime, the ungrateful... who never call, not even on Father's Day!), one way of avoiding a  lot of tax is to make the beneficiary of your 401k be one or more of your favorite charities. In fact, if your testamentary inclination is to make some charitable bequests as part of your will, it is much more advantageous to give money from a tax-deferred account to the charity (size of estate is reduced, no income  tax paid by anyone on amount given), and bequeath assets in non-retirement accounts to one's heirs (bequests are not taxable income, and heirs get a step up in basis for assets that have appreciated) rather than the other way around (heirs pay income tax as they withdraw the money from tax-deferred  account) Estate planning is a complicated business, and you really should talk to a professional about such matters and not rely on advice from an Internet forum.

negative: So there's no extra money from your employer if you contribute extra to your 403(b)? My answer will be a bit different than most others, but I'd recommend not paying another dime into your 403(b).  Pay your taxes now, and be done with them. Retirement saving does not need to be in a tax-deferred or tax-free account. Rent vs. buy is another question.  Buy from a distressed seller at a heavy discount.  You have time.  Don't panic or rush in.

negative: Everything here is yours and can be rolled into your new plan or IRA. You can generally move your 403(b) assets into your traditional IRA or into your new employer's plans, assuming your new employer's plan allowing incoming roll overs.  You can probably roll your pension out as well. Actually, the right person to ask about this is the company with whom you have your IRA.  The easiest and best way to get assets from one tax-sheltered account to another is by contacting the company you want to roll INTO and having them take care of everything for you.

negative: "Hi Alex.  I've been alerted you're seeking a better answer to this question. ;-)  Please accept my apologies for not coming back to this question sooner – it got buried. :-/  No, in general you cannot make an early withdrawal penalty-free from a 403(b) account to use towards the purchase of a home. Withdrawals before age 59 1/2 are generally subject to the 10% early withdrawal penalty, on top of ordinary income tax. Some 403(b) plans may allow for a loan, but the availability and conditions vary by plan. If you'd consider a loan, you should check with your plan administrator or your plan's Summary Plan Description – often available at one's company intranet or HR web site.  (I do contract work for an HR consulting firm that assists others in building such sites, and SPDs are usually something made available for download in a ""Retirement"" or ""Wealth"" section of such web sites.) Note that a loan from a 403(b) would need to be paid back into the plan over some period of time, e.g. 5 years, though I have come across examples of some plans that do permit a longer pay back period of 10, 15, even 30 years if the loan is used for a home purchase.  But consider this article: The 403(b) Loan: The New Debtors Prison? Finally, to your last point:  Yes, if you have an IRA, there are rules permitting withdrawal of up to $10,000 penalty-free for use towards the purchase of a first home.  See page 53 in IRS Publication 590.  There's also a good article at Fool.com: All About IRAs - For First Time Home Buyers. Such a withdrawal from a traditional IRA remains subject to ordinary income tax.  If have a Roth IRA, you can withdraw free of income tax but you need to pay attention to the Roth IRA 5 Year Rule. Additional Resources:"

negative: Take The 20k and transfer it to the new employer 401k. You then can take a loan and accomplish the same thing. By the time you pay the tax and 10% penalty, that withdrawal will be worth just over half. The same half you can borrow out, pay yourself the interest and not lose out on 50 years of growth.

negative: "I assume you get your information from somewhere where they don't report the truth. I'm sorry if mentioning Fox News offended you, it was not my intention. But the way the question is phrased suggests that you know nothing about what ""pension"" means. So let me explain. 403(b) is not a pension account. Pension account is generally a ""defined benefit"" account, whereas 403(b)/401(k) and similar - are ""defined contribution"" accounts. The difference is significant: for pensions, the employer committed on certain amount to be paid out at retirement (the defined benefit) regardless of how much the employee/employer contributed or how well the account performed. This makes such an arrangement a liability. An obligation to pay. In other words - debt. Defined contribution on the other hand doesn't create such a liability, since the employer is only committed for the match, which is paid currently. What happens to your account after the employer deposited the defined contribution (the match) - is your problem. You manage it to the best of your abilities and whatever you have there when you retire - is yours, the employer doesn't owe you anything. Here's the problem with pensions: many employers promised the defined benefit, but didn't do anything about actually having money to pay. As mentioned, such a pension is essentially a debt, and the retiree is a debt holder. What happens when employer cannot pay its debts? Employer goes bankrupt. And when bankrupt - debtors are paid only part of what they were owed, and that includes the retirees. There's no-one raiding pensions. No-one goes to the bank with a gun and demands ""give me the pension money"". What happened was that the employers just didn't fund the pensions. They promised to pay - but didn't set aside any money, or set aside not enough. Instead, they spent it on something else, and when the time came that the retirees wanted their money - they didn't have any. That's what happened in Detroit, and in many other places. 403(b) is in fact the solution to this problem. Instead of defined benefit - the employers commit on defined contribution, and after that - it's your problem, not theirs, to have enough when you're retired."

negative: You can do this with no problem. What you want is a direct transfer style of rollover. This is simply where the money is transferred from your 401(k) custodian directly to your new IRA custodian. This will ensure there are no taxes or penalties on the balance.  The key is that the money is moving directly to the new account without you having direct access to the balance. This keeps the money out of your hands in the eyes of the IRS. The process should look something like this: A few notes:

negative: The simple answer is that with the defined contribution plan: 401k, 403b, 457 and the US government TSP; the employer doesn't hold on to the funds. When they take your money from your paycheck there is a period of a few days or at the most a few weeks before they must turn the money over to the trustee running the program. If they are matching your contributions they must do the same with those funds.  The risk is in that window of time between payday and deposit day. If the business folds, or enters bankruptcy protection, or decides to slash what they will contribute to the match in the future anything already sent to the trustee is out of their clutches. In the other hand a defined a benefit plan or pension plan: where you get X percent of your highest salary times the number of years you worked; is not protected from the company. These plans work by the company putting aide money each year based on a formula. The formula is complex because they know from history some employees never stick around long enough to get the pension.  The money in a pension is invested outside the company but it is not out of the control of the company. Generally with a well run company they invest wisely but safely because if the value goes up due to interest or a rising stock market, the next year their required contribution is smaller. The formula also expects that they will not go out of business. The problems occur when they don't have the money to afford to make the contribution. Even governments have looked for relief in this area by skipping a deposit or delaying a deposit.  There is some good news in this area because a pension program has to pay an annual insurance premium to The Pension Benefit Guaranty Corporation a quai-government agency of the federal government. If the business folds the PBGC steps in to protect the rights of the employees. They don't get all they were promised, but they do get a lot of it.  None of those pension issues relate to the 401K like program. Once the money is transferred to the trustee the company has no control over the funds.

negative: Since your comment on @JoeTaxpayer's answer says that you are still under the 2012 contribution limits if the extra money is left in your 401k account, I do not think  that there is any problem for you if the money is left in the 401k account. As I understand it, your salary is $X for 2012 of which you contribute some percentage per paycheck to your 401k account. Your contributions  would have totaled $Y for 2012 if the glitch of extra money being out into your 401k account had not occurred. In the absence of the glitch, your W-2 form would have reported $X as gross wages, $(X-Y) as taxable wages and $Y as 401k contributions. Since an additional $z has been put into your 401k account, but not deducted from your paycheck, your employer could do one of two things. The extra money could be withdrawn from your 401k account by your employer. If this is done, then your W-2 form will be as described above. The extra money is not withdrawn by your employer. Your W-2 form will still report $(X-Y) as taxable wages, but $(Y+z) as the 401k contribution and $(X+z) as gross wages. Since $(Y+z) is less than the maximum 2012 contribution, everything is fine. In your position, I would very much prefer the latter alternative over the former, not just because there is a larger contribution to the 401k account with no change in tax liability, but also because there is always the possibility that HR/Payroll will screw up the withdrawal of the excess contribution so that it appears as a premature withdrawal by the participant. In this case,  the participant not only has to pay income tax on $z but also a 10% excise tax for premature withdrawal, without actually  getting even a penny from that $z taken out, which will go right back into the employer's coffers.

negative: You need a find a financial planner that will create a plan for you for a fixed fee. They will help you determine the best course of action taking into account the pension, the 403B, and any other sources of income you have, or will have. They will know how to address the risk that you have that that particular pension.  They will help you determine how to invest your money to produce the type of retirement you want, while making sure you are likely to not outlive your portfolio.

negative: This is called an in-plan Roth conversion and is discussed by the IRS here. If your 401(k) has a Roth option then it likely also has a provision to convert pre-tax dollars, but you'll have to check with the administrator to be sure. They could also potentially limit the type of money that can be converted. But most likely you should be able to convert any amount you want, and since it's all pre-tax (your contributions, employer matching, and earnings), it doesn't really matter which money is converted because it's all equivalent. One caveat is you won't able to convert any employer matching that hasn't fully vested.

negative: You need to check with your employer. It is called an in-service rollover and it is up to your employer on whether or not it is allowed. There are a lot of articles on it but I would still talk to a professional before making the decision. And there are some new laws in place that put at least some responsibility on your employer to provide a 401k with reasonable options and fees. http://www.latimes.com/business/la-fi-court-edison-401k-fees-20150519-story.html We'll see if it has legs.

negative: "First off, I highly recommend the book Get a Financial Life.  The basics of personal finance and money management are pretty straightforward, and this book does a great job with it.  It is very light reading, and it really geared for the young person starting their career.  It isn't the most current book (pre real-estate boom), but the recommendations in the book are still sound.  (update 8/28/2012: New edition of the book came out.) Now, with that out of the way, there's really two kinds of ""investing"" to think about: For most individuals, it is best to take care of #1 first.  Most people shouldn't even think about #2 until they have fully funded their retirement accounts, established an emergency fund, and gotten their debt under control. There are lots of financial incentives for retirement investing, both from your employer, and the government.  All the more reason to take care of #1 before #2! Your employer probably offers some kind of 401k (or equivalent, like a 403b) with a company-provided match.  This is a potential 100% return on your investment after the vesting period.  No investment you make on your own will ever match that.  Additionally, there are tax advantages to contributing to the 401k.  (The money you contribute doesn't count as taxable income.) The best way to start investing is to learn about your employer's retirement plan, and contribute enough to fully utilize the employer matching. Beyond this, there are also Individual Retirement Accounts (IRAs) you can open to contribute money to on your own.  You should open one of these and start contributing, but only after you have fully utilized the employer matching with the 401k.  The IRA won't give you that 100% ROI that the 401k will. Keep in mind that retirement investments are pretty much ""walled off"" from your day-to-day financial life.  Money that goes into a retirement account generally can't be touched until retirement age, unless you want to pay lots of taxes and penalties.  You generally don't want to put the money for your house down payment into a retirement account. One other thing to note:  Your 401K and your IRA is an account that you put money into.  Just because the money is sitting in the account doesn't necessarily mean it is invested.  You put the money into this account, and then you use this money for investments.  How you invest the retirement money is a topic unto itself.  Here is a good starting point.  If you want to ask questions about retirement portfolios, it is probably worth posting a new question."

negative: I suggest rolling it over to the 401(k) with your new employer.  Particularly if they match any percentage of your contribution, it would be in your interest to take as much of that money as possible. When it comes to borrowing money from your 401(k), it looks like the issues AbraCadaver mentioned only apply if you don't pay back the money (http://www.kiplinger.com/article/real-estate/T010-C000-S002-borrowing-from-your-retirement-plan-to-buy-a-home.html).  The reasonable argument against taking money out of your 401(k) to buy a home is that it leaves a dent in your retirement nest egg (and its earning power) during key earning years.  On the plus side for borrowing from your 401(k), it's very low interest--and it's interest you're paying back to yourself over a 5-year period.  At its current value, the most you could borrow from your 401(k) is $35K.  If you're fortunate in where you live, that could be most or all of the downpayment. In my own experience, my wife borrowed against her 401(k) balance for the earnest money when we purchased a new home.  Fortunately for us, an investor snapped up my previous home within 4 days of us listing it, so she was able to pay back her loan in full right away.