COVID-19 has financially affected much more than it has infected, 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 October to focus on their own opportunity or risk not benefitting from the one benefit they can receive from a global pandemic. There are many categories and levels of financial effects 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, people and companies that benefitted financially[…]

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[…]

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[…]

We are nearing the October 15th filing deadline, so all the crying is almost over 2019 tax return submissions.   We blogged throughout the summer on various topics, but now you’re down to a few weeks to effectively do 90% of what can be done to affect your 2020 tax liability.  Only a few things can be done in 2021, once you realize how big the bill actually is.  If you’re an individual making less than top wages, you can open and fund IRAs after January 1st, 2021, that can reduce your 2020 tax bill.  Other than that, there’s little that can be done once the ball drops on New Year’s Eve.  You have until then to get your act together, figure out where your tax[…]

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[…]

First, let us make it clear that we aren’t saying that your CPA or accountant is doing anything wrong.  The accounting industry is one of the most honorable and respected fields around.  That being said, there is a misconception that they are going to be proactive when advising clients about their taxes, and that’s just not part of the training most have received.  Certainly some are, but the majority who know things about steps a business could take to perhaps be more aggressive, don’t feel it’s their responsibility to pursue a client in engaging in alternative accounting choices or behaviors. A good example is “Bob” who owns a tire shop that has grown from two employees to three locations and[…]

With Labor Day here, what tax planning should I think about before the fourth quarter is in full swing?  The biggest mistake a business can make is not knowing their true numbers. The biggest mistake individuals can make is thinking they aren’t affected financially just because they “made it” and are back to work.  Business owners have it especially tough because they are stressed and exhausted from scrambling to adapt and survive with all the new restrictions in place.  They look at the books and think “I just cant be proactive right now.  Mentally, I’m wiped.  We are finally stable again and I’m just happy to be here taking a breath.  The problem is their tax returns are going to[…]

With the COVID-19 pandemic, many people who worked in an office have suddenly found themselves being asked to work from home for safety reasons.  Many remote workers, especially those no longer commuting to cities, wonder if they will have to pay taxes where they were working, or at home, or both. States use several factors to determine if they have the authority to tax a worker’s income, including what kind of a presence the worker has in the state.  Unfortunately as we have all witnessed, many times tax rules are passed without all the details fully worked out and considered.  Rule changes resulting from the pandemic have been no exception to that! “Personal income taxes and withholdings should [usually] be[…]

Many times business owners have come into our office and with our help have found that they were doing things incorrectly regarding their bookkeeping and taxes.  Occasionally, the errors add to the tax burdens that they have been underreporting.  That never feels good, but it is always better to fix those issues pre-audit.  Often, errors discovered pre-audit can be fixed by simply amending the return, and no IRS issues follow, and everyone just moves on.  But quite often, the errors made were not in their own favor and we file help them file amended returns that net them large additional refunds for up to three years back, and that always feels great! So, how do these mistakes happen?  First, let[…]

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[…]

Many business owners cheered as the news came out about the Paycheck Protection Program (PPP) loans. The money was not distributed perfectly, but for a “rush job” it was still done pretty well. Then, the money went out and we have witnessed the result, in that many businesses that had no customers for weeks and months are reopened and here to serve.  If not for the PPP, many would not be!  However, nobody can afford to let their guard down just yet, as they are loans that must be paid back in full to the SBA!  That’s right.  As of today, nothing is forgiven and we all owe PPP money back!  That can change if you take action, but many[…]

We use the term “Tax Planning” often, but we are aware that many people are not sure what it really is.  Some people think “That means off shore accounts and citizenship shell games ending with jail time.  No thank you!”.  That is not tax planning, that’s tax evasion, and it’s not at all what we recommend.  Others think only the wealthy need a tax planner, and for regular folks it can mean paying a 30 year mortgage off 12 years early or having a college fund with enough in it to actually pay for college.  Tax planning is not just for the wealthy, though.  It can be a useful tool for anyone who is aware of the opportunities. Our tax[…]

It’s human nature, of course.  We complain about our weight in the line at the ice-cream stand.  We complain about being tired, then stay up late playing the latest game on our smart devices. Humans are funny and contradictory animals. Have you ever noticed that when you’re in a conversation, people are quick to complain about their taxes?  Many people who complain about their tax bill are actually paying very little compared to most folks.  However, some people pay a lot of unintended or surprise taxes.  An example we see a great deal are self-employed folks.  They will tell us “I pay too much in federal or state income taxes”, but on review of their 1040, they actually paid no[…]

Summer is a popular time for people planning a move to put their home on the market.  It happens all year long of course, but the “hot season” is May-September.  There are many reasons.  School is out and if you have kids of that age it’s easier to change schools between grades.  Often, it’s when summer vacation schedules come around and except for tourism many industries slow down and moving done well takes at least a week and two weekends.  It’s easier to move without snow, so for some of the country that’s also a factor.  There’s are many more reasons, but Summer is when a “wave” takes place.  It’s hard work, stressful and a pain in the neck (and other[…]

For the self-employed, home office deductions can be connected to the Schedule C that they include on their 1040, which reports income and expenses for the business.  The home office deduction can be taken with two different calculation options.  One is more complex to calculate and one simplified option is based only on the square footage of the room or area they work from.  This group is not really affected by the Trump tax code changes.  Before those tax code changes, W-2 employees who worked from home also had access to a similar deduction.  Along with other expenses, such as work boots or uniforms purchased by the employee and not reimbursed by the employer, and others, and subject to a[…]

It’s July but the big fireworks are a victim of COVID-19. Although true, small local and personal fireworks will likely be everywhere as people adapt. That fireworks habit is ingrained in us so the fun will find a way. Another behavior or habit that’s ingrained into people is spending more time on “staycation” vacation plans than time spent fixing next year’s tax problem when now is the time to take your preventative medicine and avoid the pain! In being humans, we all form habits. Some are good, most are bad. We try to develop good ones to replace the bad and often we are successful. However, most successes don’t come without a coach, cheerleader, or some kind of support system. Tax[…]

Often people will have one-time “Income Events” and so planning and especially the tax aspects are the motivation. In these cases, you can consider setting up a Charitable Lead Trust (CLT) in order to receive an upfront income tax deduction. A person who has significant and unusual taxable income in a particular year can establish the grantor lead trust and use the charitable income tax deduction to mitigate the impact of taxes in his or her situation. An example might be someone who has received the proceeds from selling a business, or a stock option at work is coming due. A far more common and likely example is someone who has inherited an IRA. These situations will trigger an unusually[…]

A Donor Advised Fund or “DAF” is defined as “an account at a sponsoring organization, generally a public charity, where an individual can make a charitable gift to enjoy an immediate tax benefit and retain advisory privileges to disburse charitable gifts over time.”  But what does that mean in practical terms?   You can set up a “DAF” through a financial adviser or directly with some charities, and like giving to a charity itself, simply deduct that gift on Schedule A of your 1040 tax return.  However, many people under the new tax code no longer file a Schedule A.  Many people give to charities every year, and report those donations to the accountants.  However, since the new standard deduction[…]

Charitable planning has always allowed some great tax benefits for clients with tax trapped assets, and the second benefit, the charitable deduction.  What’s a tax trapped asset? Why is the charitable deduction the second benefit and not the first?  What are the one-time 2020 rules?  Well, that’s the point.  Most people don’t understand why these trusts are so often the “go to tool” for so many tax planners.  They have many often misunderstood benefits and aren’t really primarily about benefitting the charity at all, but the donor in most designs.  Over the next few weeks we will discuss the Charitable Planning Toolbox, starting next week with Donor Advised Funds, and will continue to explore more about these great partnerships between[…]

The people who have filed and paid too much tax again this year, as they did last year, almost always make themselves a promise that they “will do better from now on.”  They will keep better records; maintain a mileage log.  They will learn more about work options and increase their 401(k) or 403(b).  They will start a hobby job, or purchase a rental property and on and on.  Then Summer comes and it all fades into the background as the beach, golf course or woods call to them.  Family starts getting together, concerts are abound and all of a sudden it’s Fall.  Then work picks up and kids are back to school or off to an out of state[…]

That’s what you often hear from a sneaker manufacturer or a car company to create a feeling of scarcity for a product in order to drive desire or cost up.  This is not a typical tactic of the IRS.  COVID-19 and the reaction to it has created a path of human misery, but like cutting up broccoli and stirring it into your kids’ mac and cheese, there are some hidden benefits for a few people unlucky enough to have had the virus, but fortunate enough to have recovered.  One such benefit is the ability to take up to $100,000 from a 401(k) or other retirement account without penality and without full taxation in one year, as would normally be the[…]

Think again.  Of course, human life is more important, especially when it’s yours!  That being said, many of us have a worry list that is growing and if taxes were on that list, they have been pushed down by all the new concerns.  There is a growing divide in the U.S. between the people who have been able to keep working and those who have free fallen through the abyss of instant lack of income.  Those who own companies and those who work for them.  Taxes in most cases for those poor souls that stopped working are not a concern normally, other than having proper withholding, so even less now.  For those who kept working however, spending is often down[…]

Many self-employed and small business owners who did not get applications in before the money ran out the first time around, are now getting them in during this second round of PPP funding, and the frantic level of requests seen previously seem to be a bit more orderly now.  Many people we have spoken to say that they are still working in some limited capacity, or had savings and so are getting by and have avoided taking PPP funds, as they don’t feel “as affected”, although they don’t know what will happen in the future.  That’s the rub.  What if they don’t take the funds today, since they are above water, but the funds again run out, and in August[…]

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[…]

The tax planning world has been evolving very quickly in the last few months.  Needless to say, anyone who felt they had a handle on being proactive is now working with at least one hand behind their back (maybe even two).  Accountants that are proactive (a small subset of the overall group) have been very actively communicating with clients who own businesses; self-employed, independent contractors, partnerships and formal corporations.  The non-planners have been taking phone calls, the planners have been making phone calls.  Later, when the PPP and SBA applications are finished, those same proactive accountants will start working with charitable clients around the new rules that allow for up to 100% of AGI to be taken as deductions.  Then,[…]

With the “world on fire” it’s hard to care about the crisis coming in 2023 or 2024, but especially for retirees or soon to retire folks, next to sheltering in place, it’s the most important thing you can do!   Whether you think the stock market will have a V shaped recovery, a W shaped recovery or even an L shaped recovery, the message for everyone should be to focus on the fact that history repeats itself.  As far back as World War I, to fund the war needs of the country, the income tax rate jumped from 15% in 1916 to 67% in 1917.  A 450% INCREASE IN ONE YEAR!  Many other times in history, following black swan events, the[…]

These are trying times and we all have information overload, but one small piece of the new emergency tax relief legislation that seems “lost in the sauce” is perhaps the most important for retirees.  There was a last minute push for seniors to be included in the $1,200 relief checks, although if retired and on fixed income they are “less affected in theory.”  Many are supporting in some way a family member, child or grandchild, so we believe this was fair and the right thing to do.   However, it’s only $1,200, and the real gem for most retires has not been featured much in the media, as our focus has been on our collective health.   IF YOU’RE OVER[…]

We use the term “Tax Planning” often, but we are aware that many people are not sure what it really is.  Some people think “That means off shore accounts and citizenship shell games ending with jail time.  No thank you!”.  That is not tax planning; that’s tax evasion, and it’s not at all what we recommend.  Others think only the wealthy need a tax planner, and for regular folks it can mean paying a 30 year mortgage off 12 years early or having a college fund with enough in it to actually pay for college.  It’s not just for the wealthy, though.  Tax planning can be a useful tool for anyone who is aware of the opportunities.  Our tax code[…]

For many Americans the bad news surrounding the current crisis is all consuming.  Even for those not living check to check, it can still be very stressful.  Employers struggle with using savings, loan lines or selling assets to keep afloat.  Others face layoffs of workers that are practically family members.  There is a lot of heartache out there, as everyone knows.  When you find any silver lining you almost hate to even bring it up.  How dare you be positive about anything right now?  Well I’m going to risk it.  Now is an excellent time if you have an IRA and have been planning (or should be planning) to do a Roth Conversion.  If your IRAs have shrunk like mine,[…]

This tax law became permanent but it’s still very underutilized.  Many others are as well! I know on first read this probably sounds complicated, but it’s very simple.  It’s better to take the income off your tax return than to take the deduction. It’s a win and it’s now permanent. There are numerous other tax planning opportunities to take advantage of, some of which are listed below.  To utilize these deductions properly does take some forethought and planning. Permanent, now in the tax code; Qualified charitable distributions (QCDs) from IRAs Deduction for state/local sales tax is limited Even higher education credits (American Opportunity Tax Credit) Teachers’ classroom expense deduction Code Section 179 deduction is even bigger Because these have been[…]