Ever had a “light bulb” moment?  I have been driving for many years.  I’ve driven at least a million miles and I own a few cars (I collect certain types), and when driving my spouse’s car or one from the collection that I haven’t driven in a while, inevitably it’s time to gas up.  I pull up to a pump and get out and realize that the gas cap is on the other side, back up the car, turn it around with a sigh and fill it up. Then this year the “light bulb” moment.  While trying to figure out the dashboard “iPhone” charger fuse location, I happened to be looking at the diagram of the fuel gauge in the manual[…]

Not that we get much surfing here in the Northeast, but we have seen plenty of footage all the way back to the competitions on ABC’s Wild World of Sports.  Yup I’m that old.  The surfers sit and look at the horizon and anticipate the size of the waves.  It’s not an exact science, but they make their choice and then, the most important part, the proactively paddle like crazy toward the oncoming wave crest well ahead of its arival.  This allows them to meet the wave on their own terms, rather than seeing what they get when it gets to them, as they sit and do nothing.  Because of this action, they turn in time to ride the wave, and show off[…]

In the “old days”, you went to the general store for your dry goods, the blacksmith for your horse shoes or tool repair and likely had your own cow and chickens for milk and eggs.  Fast forward, you went to a lawyer to get a will, an insurance man to get a policy and an accountant to get your taxes done.  There was no internet, so information was something you had to gather and organize yourself.  You would talk to a few co-workers, a family member, a mentor and then take actions based on the limited intel.  Back then, you would sit with a financial advisor, and if they were a big deal they might have a globed ticker pumping out[…]

There are many types of taxpayers, but three common categories are: A. Those who are getting a refund which is “our money” back. B. Those who are getting their own money back and think it’s a refund but it’s really not. C. Those who are paying in, and not getting a refund. The first are the group of Americans we support as a society and for whatever reason, and whether they are hard working or not are earning under a livable wage, so we supplement their annual income with credits. Depending on the number of children and other factors, we give them more back than they have paid or had withheld. The next group have worked and had withholding or[…]

During tax season an often overlooked opportunity comes from not fully understanding how you can use your cars as a tax deduction on your tax return.  It is very common for people who have a Schedule C sole proprietor type business to claim their mileage on automobiles, but the privilege of using personal deductions on a tax return is not limited to someone who is filing a Schedule C.  For instance, a landlord might own three apartment buildings and file a schedule E on his personal tax return and not feel like he is “self-employed” as he has a full-time W-2 job. However, the use of his personal car on that schedule E is just as deductible as it is[…]

WASHINGTON ― Despite the government shutdown, the Internal Revenue Service today confirmed that it will process tax returns beginning January 28, 2019 and provide refunds to taxpayers as scheduled. “We are committed to ensuring that taxpayers receive their refunds notwithstanding the government shutdown. I appreciate the hard work of the employees and their commitment to the taxpayers during this period,” said IRS Commissioner Chuck Rettig. Congress directed the payment of all tax refunds through a permanent, indefinite appropriation (31 U.S.C. 1324), and the IRS has consistently been of the view that it has authority to pay refunds despite a lapse in annual appropriations. Although in 2011 the Office of Management and Budget (OMB) directed the IRS not to pay refunds[…]

This will be an interesting year to say the least when you go to file your tax returns. Most will be surprised, some good and some bad. From the tax return structure itself looking different, to a long list of deduction changes, everyone will be seeing something new. All year we tried to give our readers a few pearls of wisdom on planning, sometimes how to act from a tax perspective and sometimes to offer alternative paths to take in behavior that would potentially end in additional tax savings. An example of that is having IRA “required minimum distributions” go from your IRA directly to the charity of your choosing if you are over 70, instead of coming to you[…]

Tis’ the season! Take the time to celebrate the holidays with family and friends. Happy holidays from the Tax What-If Doctor!

Ask anyone if they “pay too much income tax” and the knee jerk reaction is almost always, “yes!” and without much hesitation. Why do we call that a knee jerk reaction? Because if you then follow the question up with two more questions, “What did you pay in federal tax last year? And/or what bracket are you in?” they almost as quickly say, “I don’t remember, or I’m not sure”. Or they might guess at a bracket percentage, but usually not correctly. I’ve even had people profess the pain of paying too much in tax only to discover that not only did they get back all of their withholdings, but were given tax credit refunds of money they did not[…]

There are only three weeks left to make something great happen with this year’s tax bill. If you are over 70, save the time you would have spent getting clothes together and boxing them and driving in the holiday traffic to a charity for the tax deduction (this can be done January 3rd), and instead have your investment advisor set up a direct gift from your IRA to the same charity. It still satisfies “RMD” (minimum IRA withdrawal requirements) but takes that amount completely off your taxable income total! If you’re a small business owner that files on a Schedule C , set up your kids to receive payroll from your company and get checks issued and then cashed from[…]

It’s that time of year again and many businesses with fat bottom lines, or even just with joy in their hearts, are getting ready to rinse and repeat what they have always done; buying tickets and food (perhaps adult beverages also) to celebrate and appreciate their work force. The new rules generally allow the holiday party if it’s at the office, but the IRS has set new nondeductible guidelines for entertainment. It’s not clear, for instance, if you usually take you entire office to a holiday show, sporting event or concert, whether that part will still be deductible. More time and guidance will shake that all out, but at the moment it’s possible that it’s not, so you may want[…]

People love to vacation. Some do it often, while others hold on all year for that one great week and live day by day until that magical start date on the calendar! A new wave in our digital age is to only take three or four day weekends, but do it more often. However you “vacation”, they do have one common thread, and that is that they are not free. Furthermore, when you are officially vacationing (which becomes a mind set as well….I am officially on vacation as of right now!) you spend more freely, often with a disregard for cost shopping. “I’m stopping at Starbucks for the Mocha Frappuccino, not Dunkin, cause I’m on vacation!”. What if next vacation[…]

This time it’s clarification of the home equity mortgage deduction, and as with the business meals issue, it’s not as bad as it had first seemed!  The more the details from the broad rules last February have come out, the more we are liking the news!  When business meals were first named as no longer deductible, we thought it would be changing the landscape of the power lunch.  But, details released later softened the blow and it came to light that what the IRS was actually after was a much more targeted class of meals inside entertainment and around employee cafeterias and the like. Now, the details have come out on another headline item that made people groan when first announced:[…]

Part of giving good tax planning advice is understanding short term emergency needs, but also human nature.  Often, before TCJA (Tax Cuts & Jobs Act) people in a cash crunch or in other emergencies would look to their 401(k) for a loan.   After all, that’s where a great deal, if not all, of their “savings” are accumulated.  However, there are several problems with that thought.  First, a 401(k) isn’t “savings”, it’s a “retirement” plan, and the structure of the assets inside are not generally cash, so taking a loan could mean selling an asset and losing growth opportunity that could be critical to the fund’s objectives.  Secondly, the rules on repayment to the 401(k) account might be fine while you[…]

In a few months the U. S. will begin filing tax returns again, and at tax firms all over the country people will be making the “E-Trade” Shocked Baby Face (remember him?) when they see they are being charged penalties and interest for under paying their taxes due. Even if they made a 941 payment in the last quarter to cover ALL the tax due for the year, they can still find themselves fined by Uncle Sam as a penalty for not paying equally over the four quarters of the year. A last quarter over payment simply means they underpaid for three quarters and overpaid for one quarter, and no, it’s not “good enough” for the IRS. People also argue[…]

Some do it often while others hold on all year for that one great week and live day by day until that magical start date on the calendar! A new wave in our digital age is to only take three or four day weekends, but do it more often. However you “vacation”, they do have one common thread, and that is that they are not free. Furthermore, when you are officially vacationing (which becomes a mindset as well….I am officially on vacation as of right now!) you spend more freely, often with a disregard for cost shopping. “I’m stopping at Starbucks for the mocha frappe latte, not Dunkin, cause I’m on vacation!”. What if next vacation you could upgrade to[…]

Late last year the government changed the tax code substantially and, among other things, created a new code section 199A for small business owners.  This created a buzz as many business owners were made aware they would be getting a huge tax break.  They also announced simplifications, like doing away with personal exemptions and instead increasing standard deductions.  In the long run, it should make it easier for people to understand their numbers, although for many it will mean an uptick in what they are paying in tax.   One of the perceived losses was the deduction for many kinds of business meals and entertainment, which was generally “shoulder shrugged” off as a “cost” of simplification.  “If we are getting[…]

All around the country, there are people in an absolute panic because the real tax deadline for personal tax return extension filers is approaching and they are running out of time.  A few blogs ago, we talked about how to possibly deal with not being ready for the corporate deadline on September 15th .  We don’t have an amusing anecdote for the October 15th deadline like we did for the corporate deadline.  The deadline is the deadline. The exception would be for those who have been affected by flooding or other natural disasters and may be given an extended deadline by the IRS.  Those people may now have until December 31st to file, but would need to check the IRS website to see if they are in an affected area[…]

Every year the IRS gets together and starts looking at economic news and forecasts and works with several departments of the government to tweak our tax code.  They look at the leading economic indicators, they decide what they need to change, and the collection of tax revenue often changes by year end.  Will they do that this year after the most sweeping changes in a very long time?  In the past, they would create a lot of  temporary tax rules to steer the ship, but it’s a new course and we have only been sailing a short time! These new rules will be a very big surprise to many Americans, both winners and losers, as next year’s tax collection shakes[…]

If you have an S Corp based business then you are seven short days from your last deadline.  You can’t extend the extension, so what if you’re still just not able, what do you do?  Technically, you should be ready to file, so you’ll get no sympathy from Uncle Sam unless you fall under very rare special circumstances.  In a nationally declared disaster area, deployed in the military under certain special circumstances and a few other super rare groups.  Chances are very high that you don’t get more time, so what to do?  The penalty for not filing is substantial.  However, the penalty for making an error and having to amend later is zero.  S Corp returns give their owners a K-1,[…]

With fall in the air, it’s time to start thinking about things that need to be done to prepare for winter.  The garden harvests are rolling in, fresh vegetables are everywhere and it’s really, really great.  Time to fill up your oil tanks before the price change, and at least know where those snow tires are in the back of the garage.  It’s also time for tax planning. There are so many things in the tax code that have time limitations.  It’s really time to check in with yourself if you want to actually participate in your bill with the IRS.  Taxes can be very much within people’s control, even though they don’t feel that way.  If you’re still out on extension, heads up — you[…]

Many people don’t really think about their taxes until the snow is flying and the first document arrives in the mail.  Why would you, right?  Year in and year out people often get into a set of habits around getting things together for their preparer.  That`s usually not a bad thing, but in a year like 2018 when so many things have changed we see on the horizon a sea of surprised faces when they find out their usual $1,200 refund is now a $500 balance owed to the IRS.  Or their usual $1,000 tax bill is now $1,900.  Of course, like any changes there will also be winners receiving happy surprises.  But what side will you be on?  If[…]

First, let’s say upfront that a business that has sources of income and expenses and leaves 25% profit on the table is an awesome business!  Example: A Plumber makes $400,000 a year and spends $300,000 a year on plumbing tools, trucks, repairs, staff, insurances, etc., and walks away with $100,000 at the end of the year that he can put in his pocket; great business!  It would be rare that it’s that easy.  More likely, he puts $60,000 in his pocket and sneaks a few personal expenses into his plumbing books.  In a very rare case in the other direction, 50% in expenses and 50% profit, but he probably wouldn’t do that every year.  That would be a “magic year” with no repairs to fleet vehicles, no staff turnover,[…]

The tax code is much more fluid than the public is truly aware of and deductions and credits come and go all the time.  Deductions like mileage for business owners change with the cost of gasoline, for instance, and can go up and down annually.  Often, it is actual programs that come and go, like energy tax credits or being able to transfer an IRA to a charity directly without paying income tax but still satisfying RMD requirements.  Often, these programs are temporary, and depending on whether the government believes that they have met their objectives, sometimes expire, or may become permanent.  Capital Gains has remained on sale!  It’s been changed over the years, but under the original Bush tax[…]

The IRS just gave guidance that a nondeductible IRA may still in fact be converted into a Roth IRA.  For those who didn’t know about that planning strategy in the past, at a certain level of income people were no longer allowed to deduct their IRA contributions.  Many advisors thought that the rule was that the higher income earner could not open an IRA, which was incorrect.  You simply lost the ability to deduct them. Why would I open an IRA that I could not deduct?  It was still tax deferred growth after it was opened, so a “tax deferred annuity” that could be invested in any way an IRA could be.  Later, with the creation of a Roth IRA[…]

In May, people will be filing there 2018 Tax Return in another 7 months with a recurring Moooooan and Grooooooan. Now is the time to take your preventative medicine and avoid the pain! We all form habits, we are human. We try to develop good ones to replace the bad ones and often we are successful but most successes don’t come without a coach, cheerleader or some kind of support. Tax Time is usually a time of regret over not being successful at last years promise to oneself, “I not going to pay this much again, I`m going to keep better records and search out a Tax plan or some professional help and get smarter about this!” Then summer comes[…]

There is so much good in the business world from the new tax laws that we feel bad to even mention this, but we did lose some deductions that had become automatic in so many minds that we feel we must! As business people ourselves and for as long as we can remember, taking a client or prospect out to eat or to a round of golf or a concert has always been how business is done!  Then tax deducting it is also how business got done…NOT ANY MORE!  It’s time to review the old and new tax rules, and perhaps nothing changes, as business getting done first always trumps (no pun intended), and deducting it was a pleasant after-effect.  Perhaps the fact that deducting meals with prospects was allowed you to splurge[…]

It is soon to be celebration time all across the U.S.  Our Independence Day, our birthday is on the horizon.  It is summer, Veterans day and Memorial Day and even the 4th of July make us all think about all of the sacrifices that were made to get us here.  We are very, very thankful.  Everyone should be.  When celebrating most folks focus more about everything that happened in the Colonial period.  The Revolutionary War was the gateway to our independence.  The desire for independence was fought over many things but mainly about taxation.  The Boston Tea Party and many parts of the revolution were spurred in part from being levied and taxed on every single thing that we did.  The quote “taxation without representation is tyranny” was[…]

It’s June, and people will be filing their 2018 tax return in another 7 months with a recurring moan and groan. Now is the time to take your preventative medicine and avoid the pain! We all form habits, we are human.  We try to develop good ones to replace the bad ones and often we are successful, but most successes don’t come without a coach, cheerleader or some kind of support. Tax time is usually a time of regret over not being successful at last year’s promise to oneself, “I’m not going to pay this much again, I’m going to keep better records and search out a tax plan or some professional help and get smarter about this!”  Then, summer[…]

Everywhere I go, like the dandelions popping up all over my lawn no matter hard I work at their extermination, there are cars on the side of the road and the unmistakable buzz of people with “yard sale face” rushing to see what hot deals they can find.  It’s a summer ritual, and as badly we all crave summer, a welcome sign.  The biggest yard sale we have ever seen has been open and running for almost a decade now and still not many people are parking out front and rushing in and THEY SHOULD BE!  It’s the capital gains tax rate and it’s a big sale. Does the IRS really have “Yard Sales?”  Yes, all the time! The tax[…]