Many investors have had success this year, which might mean that capital gains tax reporting is on it’s way to their 2021 tax returns.  If you own stocks you love and you didn’t sell this year, then you have no tax issues, so no problem for the direct buy and hold group.  However, many people own mutual funds and or have money management strategies that cause them to buy and sell securities throughout the year.  Even if the investor did not sell or take a redemption, others in their collective group did, so every investor in the group will share in the tax burden. That said, it’s not too late to deploy a tax saving countermeasure.  It’s a limited window[…]

The Journal of Accountancy has released these 2022 tax rates from the IRS: The 2022 standard deduction will be $12,950 for single taxpayers (and married individuals filing separate returns), $25,900 for married taxpayers filing jointly, and $19,400 for heads of household, which for 2021 are $12,550, $25,100, and $18,800, respectively. Other changed amounts for 2022 (arranged by Code section order) include: Unearned income of minor children (“kiddie tax”): For tax years beginning in 2022, the amount used to reduce the child’s net unearned income is $1,150. Maximum capital gains 0% rate: $83,350 taxable income for married couples filing jointly, $41,675 for single taxpayers and married individuals filing separately, $55,800 for heads of household, and $2,800 for an estate or trust. Maximum capital[…]

In the “old days”, you went to the general store for your dry goods, the blacksmith for your horseshoes 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 rep 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 stock ticker pumping out tape[…]

The events of the past few years have brought significant changes to the lives of almost everyone, and our financial future as a country is tenuous as a result!  As Fall takes hold, there is still time to at least make one glass of lemonade from all the lemons, but people need to put time on their calendar in November to focus on their own opportunities, or risk not discovering the one benefit they might receive from a global pandemic. There are many categories and levels of financial affects that have taken place, but for simplification in this case we will separate everyone into two groups.  People negatively affect (many ruined or greatly wounded) and those on the other side,[…]

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[…]

In October, as Halloween approaches, the fall wrap up begins around the house.  Any remaining lawn chairs, storm windows and etcetera, all go into place ahead of the first storm.  Sure, for some places, like Arizona, winter is just a nice break from the heat.  But, for a majority of the country that lives in the snow belt, November means batten down the hatches. The same is true for finance and tax planning.  People start looking at their holiday shopping budgets and looking at their end of year projections (if they’re financial goal setters) to see where they are at.  We often talk about tax planning, but the 911 calls start in early December, and there’s a lot that still[…]

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[…]

That’s a reference to an old cartoon where Bullwinkle the moose was about to do a magic trick and would push up his fur, as if it was a shirt, and say “nothing up my sleeves, PRESTO” and pull a rabbit out of a hat.  It would never be a rabbit that came out of his hat, of course.  The trick always went wrong and instead he would pull out Rocky the flying squirrel, his cartoon partner in adventures. Sometimes, when the IRS is defining (or more so not fully defining) tax policy and rules, they do something that has an unexpected “presto” result, and something else comes out of the hat. Normally those “unintended consequences” are exploited right away[…]

The real tax filing deadline is less than three weeks away (Christmas is less than 100 days away but that’s another blog)! There are many reasons people find themselves needing to delay their tax filing.  Sometimes there is no reason, it’s just their least favorite thing to do. “The IRS allows for extensions and for a path to get to October 15th at 11:59 PM before I have to file them.  Why not wait until then?” For many, it’s because they don’t have the money to pay what is due, so they feel like until they send the paperwork in, the IRS doesn’t know.  This is unfortunately not really helping anyone, as the tax payments were due on April 15th,[…]

Every new president makes changes to the tax code, so why is this time so different?  The short answer is because our “books” as a country have never been in worse shape, not even during World War II.  COVID related spending is only icing on the already giant cake of our current federal debt that is the result of the mishandled US financial affairs of the past several decades!  The total national debt as of a week ago was 28.4 trillion dollars, and more importantly, that amounts to 128.5% of the entire GDP of the country.  The previous high was 119% of the GDP in 1946.* In 1941 the two lowest tax rates for Married Filing Jointly (MFJ) were 10%[…]

Don’t let your stockbroker off the hook when it comes to tax planning.  Many people work with brokers when they buy and sell stocks.  Many people now, because of the internet, also have become their own stockbrokers, doing their own research and trading on various platforms.  Whether you use a professional or do your trades yourself, you still need to hold your stockbroker accountable.  What do I mean?  If a broker is helping you buy and sell, they had to take a Series license of some kind.  Sometimes, an RIA (Registered Investment Advisor) has taken a Series 65 exam.  If it’s a representative of a broker/dealer, perhaps they’ve taken a Series 6 or a Series 7 exam.  There are other possibilities, but the point is, these exams[…]

Well, do they or don’t they, actually?  Long debated and often manipulated by the media, the topic of the wealthy and taxation has many, many complex points and counterpoints.  First, when people say that, they often don’t define what kind of tax.  The people hearing the comment usually go to federal personal income tax in their mind as TAXES. However, if a wealthy person owns 20 C corporations, with each filing their own tax returns, those C corporations pay their own taxes and unless the wealthy person needed to take a dividend or other distribution, then they could pay zero federal income tax, even though their companies paid potentially millions in taxes themselves.  The kinds of taxes people pay depends[…]

An often overlooked tax planning opportunity comes from not fully understanding how you can use your cars as a 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 for the[…]

It’s hard to be logical all the time about everything.  The most financially successful tax clients we serve at least attempt to force themselves to be logical, for their own benefit.  For instance, our parents, as well as a subset of the economy including some popular radio show based advisors like Dave Ramsey, say you should pay off your home and have a “free and clear” deed as a goal (they are wrong in most cases by the way).  That kind of thinking is emotional thinking, mixed perhaps with some presumptive attitude about what the general populous is capable of.  “Well, we know we can’t get people to do what would really be best for them based on pure math[…]

Hey, it’s still summer outside, so no one wants to think about income taxes, right?  We’re sorry, but it’s time, especially for businesses that are on extension for filing their 2020 returns.  S Corp and Partnership returns must be filed by September 15th (check your state for disaster extensions) and that’s just a few weeks away.  And as for current year tax planning, the most widely used and popular business planning tools available are pre-tax savings plans, both for employers and employees.  401(k), profit sharing and defined benefit plans are all ways for business owners to avoid tax on income earned this year.  Unlike IRAs, which can be started and funded up until next years’ filing deadline, these plans have[…]

Have you worked toward losing weight in the past because you want to look more attractive, or fit into an expensive wardrobe you already own? When you lose weight you often also lower your blood pressure and/or cholesterol as a bonus. It might not be the primary motivation, but the extra benefit is of course welcome! If you are a business owner, then we pose this question. Some time ago you had an idea. Over the years your turned that idea into a successful and profitable business. Have you properly protected what you worked so hard to build?  An unexpected turn of events could put your biggest asset at risk. Did you know that moving business earnings into a qualified[…]

On March 17th,  the Urban Institute, Brookings Institution and their individual authors, reported that because of the small share of the population currently eligible for itemized tax deductions for charitable giving, many charities have argued that a more universal charitable deduction or tax credit should exist.  A more universal subsidy could (but would not necessarily) increase significantly the resources made available for charitable purposes and would symbolize the nation’s commitment to giving as a strong societal goal.  In their brief, they showed that whatever the revenue cost associated with a more universal deduction, policymakers should consider how to maximize the amount of goods and services that can be provided efficiently and equitably to charitable recipients for the subsidies it provides.[…]

Go to any party, any backyard BBQ, baseball game or the yacht club on race day and you are likely to hear someone complaining about taxes.   People love to hate them, but they act as if they have no control over them!  Taxes are not a storm over the ocean that “at God’s will” might or might not come to shore and wipe out a town.  They are a known, published set of taxes on various income types, with rules.  Like a chess game, if you want to win you can study the rules and the game and when the opponent makes a move you can make the appropriate counter move and win.  There are offsets and credits in the[…]

The answer to that might surprise you.  Because, for the most part, the answer is yes.  However, sometimes they are only fair if you know how to “play the game”.  Most people think only the wealthy can avoid paying income tax because they know how to play the game.  Well, at a much lower level, everybody knows some of the tricks to “playing the game”.  For instance, you might be contributing to your 401(k) at work.  Well, you’re playing the game.  However, you might not know that even though you’re contributing everything you can to your 401(k) at work, you’re still allowed to open an additional private IRA, and take another several thousand dollars off of your taxable income.  That trick is “knowing the rest of the rules[…]

With every new president, we hear that taxes are going to be changed.  Some promise to lower them in order to get elected, even though there is no way for them to go down while we spend the way we do, service our huge debts and keep the lights on.  Some say they are going up, but only on “corporations, or the rich, or”…and they pick out a villain for everyone to hate.  Those people, however, are the people that give politicians hundreds of millions of dollars in order to help them get elected.  Those promises fade, get changed and loopholes that are plugged get unplugged. Most of what actually gets passed affects the people or industries that have the[…]

Many people are looking at their calendar and realizing that June has passed, and although they had great intentions in March and April of getting proactive in and around learning how to mitigate this year’s tax outcomes, the time has slipped by.  People who should be storing capital differently in that stock brokerage account have already been paid six months in dividends that are coming to them as a 1099 next tax season. Those people that meant to move the funds out of the bank are going to receive six months of interest now.  People who see the calendar, see the date, and are already feeling remorse, often say “Oh well, too late again this year”, since mentally, “the damage[…]

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, they proactively paddle like crazy toward the oncoming wave crest, well ahead of its arrival.  This allows them to meet the wave on their own terms, rather than seeing what they get when it arrives, as they sit and do nothing.  Because of this action, they turn in time to ride the wave, and show off their ability to plan and execute. Taxes, of course, can often be watched on the horizon and anticipated, especially if it’s a big wave.  You know you are retiring in November and you have built up[…]

It seems like everywhere I go, 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 nice to see some post pandemic normalcy. It’s always been a summer ritual, and as badly as 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 code is much[…]

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 Frappuccino, not Dunkin, cause I’m on vacation!”. What if next vacation you could upgrade to fly[…]

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[…]

When people save for retirement they almost automatically use accounts that avoid tax now.  IRAs, 401(k)s, 403(b)s, 457s, all pretax retirement savings plans.  Certainly, long term savings uninterrupted by withdrawals and the effect of compounding interest on interest earned is unarguably valuable, but doing that in pretax accounts is NOT the only way to have that happen!  Non-qualified annuity and Roth IRAs allow the same mechanics of compounding to happen, and in retirement both can be as valuable depending on the circumstances and actions of the retiree. Annuities are underappreciated as a tax planning tool, because of the way earnings are treated as ordinary income upon withdrawal.  However if annuitized at retirement (an option the advisors that distribute them often[…]

Although currently very little has actually changed tax rules wise, many things are proposed.  Under an executive order a few things have actually changed around child credits, so if you have children there are benefits starting now for many Americans in the lower tax brackets.  Also, one item that affects many small business owners is a change in the premium tax credit.  In the past, when people receiving subsidies from the insurance market place earned over 400% of the poverty level in income (around $40,000), they had to start paying back some or all of that premium subsidy. That amount for the next year has been raised, allowing most to not pay back any premium.  These changes are in affect[…]

It’s May and the 2020-2021 tax filing season is finally coming to an end, and for many with a familiar recurring moooooan and grooooooan of having paid too much in taxes.  Now is the time to take your preventative medicine and avoid the pain next year! Being human, we all form habits.  Some good.  Most bad.  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[…]

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 rush”  masks,  rushing to see what hot deals they can find.  It’s a Spring/Summer ritual and its back.  A welcome sign of things slowly getting back to normal.  But the biggest yard sale we have ever seen has been open and running for almost a decade now (the IRS is hosting), 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[…]