It’s June. In a few short months people will be filing their 2019 tax returns with a familiar recurring Moooooan and Grooooooan. Now is the time to take your preventative medicine and avoid the pain! 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 not going to pay this much again. I`m going to keep better records and search out a tax planner or some professional help and get smarter[…]
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 401k at work. Well you’re playing the game. However, you might not know that even though you’re contributing everything you can to your 401k at work, you’re still allowed to open an additional private IRA, and take another $6,000 or $7,000 off of your taxable income. That trick is “knowing the rest of the rules[…]
Taxes, like rain in the Spring, are a constant, but you can open an umbrella. Many people are looking at their calendar and seeing the end of June, and although they have 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 that 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[…]
Do you like losing weight because you want to look more attractive or fit in an expensive wardrobe you already own? You also often lower blood pressure or lower A1C. It might not be the primary motivation but the extra benefit is of course welcome! If you are a business owner than 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 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 dollars into a qualified plan could protect your assets as well as provide a current tax[…]
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[…]
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 are[…]
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[…]
Tax filing season is over (for most of us). So, why even think about them? Because you are taxed all 365 days of the year. 366 in a leap year! You may only settle up with the IRS once a year, but taxes are assessed on you every day! Gas taxes, sales taxes, property taxes, income taxes, payroll taxes, snack taxes, even milk taxes, and more. All day, every day, like breathing. Wow. Ok, so what’s the point? Usually, income tax is the largest tax you will pay. And, unlike the others, it’s generally the only one you can actually control and change by planning ahead. It’s already May, so you are almost at the 6 month mark for the year.[…]
People often struggle with record keeping and are often so busy that they are simply unaware of tools or services that have been developed that could greatly improve the recording and tax deductibility of expenses, miles and other useful things. Tons of topics we could cover here, but two that are universal. If you are in business, you have a phone and a car. Cell phone are pretty typical for smaller companies. What we usually see is a personal cell phone bill and of about $150-300 a month, and of course the business owner wants to deduct it all. When you start asking questions however , almost always, it’s a family plan with spouse and kids on it, so 80%[…]
Some reflection after the push of the 2018 tax season. Not who won and who lost, as that was all over the board. Also speaking of “board”, I’m bored with all the finger pointing and blaming around the new tax rules. Tax policy is fluid and always has been. Like Fed policies and a hundred markets around the world, things will always change. Like flying an airplane. You take off with a flight plan, but you fly by your instruments, reacting to weather and other planes in your airspace. The real question is, is there a great new inequity that wasn’t there before? The answer in our opinion is, not really. It changed the most for big companies being[…]
Many people this time of year are rushing to try to throw their taxes together. They’re doing so with regret in their heart because they promised themselves last year that they would be in better shape to get their taxes filed on time. Yet, here they are, files here, files there, a general idea of where everything they’ll need is, but no time to properly compile it, and gosh, look at the calendar. “I will never be able to get my return filed by the deadline.” We feel that this is actually a good thing for those people — the entrepreneurs or the busy folks — because rushing to put tax items together almost always puts a “win” in the IRS side[…]
With tax season in full swing and documents from broker/dealers and other investment companies coming out later and later, you can definitely smell the tax “angst” in the air. The amount of pressure that tax offices and their clients seem to be under is palpable. Why is this all happening and what about this is important to you? It’s happening because, over the years, although the IRS has stood firm at mid-January to April 15th as the filing season for 1040 filers, on the other side of the equation are the vendors themselves that have to send documents to the IRS: The banks, the mortgage companies, the investment companies, etc. The companies have managed to lobby and get extensions of time[…]
Now that we are deep into tax season, it is becoming apparent that when people heard about tax simplification being passed under Trump they didn’t really pay a great deal of attention. I guess the constant headlines of change to everything could have made it hard to focus, but we tax planners had a lot to learn and we dug in. In March of last year we thought we had completely lost the business meal and home equity mortgage deductions and a bunch of other “Oh no, not that” items. Over the summer, more details and clarification came out on each item and it became apparent that the cuts were more and more targeted and not as broad as first though.[…]
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 items which we’ll partiality list below as well. 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[…]
The deadline to file pass through entity business tax returns is today, and unless they are ready and filed by midnight, they will be subject to penalties and fees. An extension will allow an additional six months to file the business return, so it will not need to be filed until September 15th, 2019. The extension does not change when the actual taxes are due. Since the taxes resulting from a pass through entity will ultimately be due on the personal return, the payment of the taxes is due no later than April 15th, 2019. You can prevent the late filing fees and penalties by submitting an extension request for the business return today (and if applicable, for the state[…]
At this time of year many people who were getting a refund have already filed their tax return. It leaves the remaining majority of folks who, despite having withholdings, are still going to owe additional tax. We talk a great deal about tax planning and changing behaviors to achieve better outcomes in the future, but many are faced right now with a tax bill for the past (2018 tax year). So what can be done? Anything? The answer is YES! It’s actually simple and easy for most folks to substantially reduce the tax liability they are facing by opening a prior year IRA! It is one of the very few ways the IRS allows you to retroactively affect your taxes.[…]
In the great Northeast, three quarters of the way through February, the snow piles are getting higher and higher in the mall parking lots and at that intersection you can’t see around that everyone hates. It didn’t happen all at once. Our first snow was in October this year. It didn’t stay, but it set the pace for five months of winter. As each storm leaves it’s trace, some melts away, some gets rained away, but overall it accumulates. We might get ten inches, but only three really ends up on the pile. Then another five inches, but this time all five end up on the pile, etc. Your tax burdens build up the exact same way. And there isn’t some magical button you[…]
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[…]
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!
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[…]
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[…]