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[…]
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[…]
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[…]
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[…]
Now that spring has sprung, it’s easy for people and advisors alike to drop the subject and not want to think about taxes for a while. That is unfortunate, as most tax advice needs to be given by May or June to have long enough to help your clients when it’s time to file their next tax return. Send them a contact like this one below and help them plant tax saving seeds they will enjoy next New Year! Tax Planning has often been misunderstood because the advice that our parents gave us is theoretical and absent the consequences from the tax code. What do I mean by that? There are general principles in life that have been passed down[…]
With tax season now behind us, except for all of those who are on extension, tax planning takes a new turn. People are going to senior fairs, home shows, boat shows. It’s great to get out of the house and start getting out into the world again and everybody has some kind of wish list and plan for the summer; it is so short after all. If you’re about to invest in a boat (I use the word invest with tongue in cheek as a boat as a whole and the ocean that you pour money into) or in landscaping for your home, new windows, new roofs, whatever you’re up to, there just may be a tax component involved. Many[…]
There’s a lot going on in the world right now, and a lot of new platforms to look at it on, but the best policy is to focus on tasks and don’t get distracted. Since the invention of the Internet, people have become overloaded with information, and much of it is not necessarily true, or at least it’s slanted to create an opinion that has a business purpose behind it; fake news and many other ways that people can twist the truth. Meaning that you have to be very careful about taking action on something after you hear about it without a little further digging. This is especially difficult to do when people’s attention spans have shortened. The other day, I had a[…]
There are a lot of things that have changed about the tax code. Things that were deductible before that will no longer be, as well as things that could not be done in the past that now can be. There’s a lot of confusion and it will take time for the public to slowly get used to things that they have turned into habits, keeping medical receipts, keeping traveling expenses, deducting moving expenses. There is a lot that has changed, but the most important things haven’t changed Organizing and record keeping are more than ever extremely important, and that’s the place that most of the people who are confused about the new tax rules have already got an ongoing deficit that they should[…]
A tax extension is a request for more time to send returns to the federal and/or state taxing authorities in which you owe tax. A request for more time is not an extension of more time to pay any tax due. The federal and/or state taxing authorities need to receive 100% of all tax due by April 15th (or the actual filing deadline, if adjusted by weekend/holiday) each year in order to avoid penalties and interest charges. Therefore, you the taxpayer has the responsibility of estimating whether you might owe tax. How could people know how much they will owe before the taxes are calculated? You are the only one who knows what you have earned, what has changed about[…]
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 (2017 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’s is one of the very few ways the IRS allows you to retroactively affect your taxes.[…]
The deadline for filing Partnership and S-Corporation tax returns is approaching quickly. The deadline to file your business returns is March 15th, 2018 and unless they are filed by then they will be subject to fees and penalties. An extension will give you an additional six months to file business returns, so a business would not need to file until September 15th, 2018. The extension does not extend when the payment for taxes is due, if applicable in their state. The payment of the taxes from pass through filings is due no later than April 15th, 2018.
Today’s blog, though, is actually not part of the new rules, it’s part of the undoing of the thought process that comes with the tax collection and reporting system that we have created here in the U.S. (said tongue in cheek, as I had very little to do with it. In fact, nothing at all, I don’t believe). This is the time of year where people are getting documents in the mail and the self-created mental pressure starts to build. The required documents are mailed to you and the IRS says that you have to file your return by April 15th…hardly any time!!!!!! However, they also offer you an extension, and the extension is: A. free, B. always granted under all[…]
Last week we looked at how businesses could potentially save more by tax planning changes than what they would get from the 20% QBI (qualified business Income) deduction next year. The week before that we talked about mortgage deductions and planning tips. This week we are getting down to the “core” of the changes (cute right?) and what the taxpaying public really needs to get their arms around. The talking heads on CNBC and some of the other more neutral media outlets are talking about the signs we are already seeing of confidence in the economy. People are starting to see a little more in their paychecks this week, which brings a nice warm feeling this time of year. Even[…]
In our first Tax Code Changes blog, we spoke of IRA withdrawal behavioral changes, and last week we talked about mortgage planning tips under the new rules. This week we will tackle something for the sole proprietor business owner who uses a Schedule C for business income reporting, as this applies to most small businesses in America. The new rules have opened a window of controversy over a new IRS term of art called “QBI” or qualified business income. Each pass-through business including sole proprietors will be able to deduct 20% of the net profit of their business before applying the tax when filing their personal return in 2019 for tax year 2018. The rule limits that deduction to a[…]
We`ll have lots to discuss over the next few weeks and months about the actions you might need to take because of the sweeping tax code changes. The last topic was changing how you make your contributions to charity by doing direct transfers rather than the traditional, now old fashioned and less effective, way. Today we want to “tackle” (yup super bowl Sunday influences the bloggers) something that affects a large part of the population: mortgages! Like our charitable conversation two blogs ago, the mortgage interest deduction is also claimed on schedule A, so the first observation is that many people will simply no longer get any value from their mortgage interest because the new standard deduction is twice as much as[…]
There are many ways a tax return can be done that are all OK with the IRS, but only one of those ways nets the largest refund! People need to understand this across America, and we talk about tax planning constantly. We blog, tweet, post, e-mail and on and on, yet we as an industry are not even getting 10% of the public to take on tax planning! The clients who do are often thrilled at the outcomes, and yet it’s just hard to get people to want to spend half the time that they spend planning their vacations on planning their own tax outcomes! (larger refunds would pay for those vacations?!?!) Planners offices often don’t look like a franchise[…]
Well, there are so many nuances to the new tax rules that we thought we would break them down over the next few weeks and cover a rule change a week, and then practical examples. The news has covered the doubleing of the standard deduction to death, but knowing it happened doesn’t really help much. What do you do about it? Anything at all or just enjoy? One practical matter would be thinking about what got listed on Schedule A of the return, and can you shift any of those expenses to other places on the return so that you not only get the new higher deduction but some additional benefit? Probably. Take, for instance, your charitable contributions, which are[…]
We have been reading about the 2017 Tax Cuts and Jobs Act for a week now. OVER 500 new pages of code changes and even new sections of code, with much detail yet to be released. Our advice to you? Step one…take a breath and don’t feel like you need to make a mad dash to major changes. It may be months before we get some of the most important details about our new reality. Step two, take all the water cooler, social media and barbershop advice you receive with a grain of salt, and with a “note to self” that you will need to go find out the FACTS about the rumored item (and yes, I am saying[…]
Like many people, we look hopefully at the New Year and all its potential. The changes in the tax code are still not out in full detail which is something the IRS has often done, but enough is out to safely say that one New Year’s resolution will need to be to change some old habits around both financial behavior and record keeping. Structurally, many things remain the same. There are still seven tax brackets, and where you land in those brackets will dictate how much of your income you will owe the government. The numbers have changed from 10% to 12% and 15% to 22% but the standard deduction almost doubling for many will mean that although you might[…]
Here are 3 things you can easily do before the end of the year! Tip #1 For those people with capital gains from sales of stock or from mutual fund distributions, many know that they can offset those gains with a loss, but few actually sit down and do the annual exercise. It is a good idea to meet with a Tax Planner to look at your losses or winnings. By selling those losing assets, you can offset your other investment gains and end up with an equivalent of no capital gains. Many people would rather not sell their underperforming assets, because they believe they’re about to “come back” and wouldn’t dare wait the 31-day waiting period to repurchase the[…]
With tax code changes in the air, like the sweat smell of fresh cut grass in the spring, we are hopeful. However, whether the tax code gets overhauled, or change somehow slips through the cracks, it is ultimately our own behaviors and choices all year that will save us the most in tax, not the rules around it. The government isn’t talking about taking away IRA, 401K or other pretax accounts. They may allow a larger amount or lessor amount to be contributed in the new package. It doesn’t really matter, as a large number of people who need to be contributing now…..don’t! If the new tax rules go into effect, and they have $2,000 more in their pocket at[…]
By the time you read this we may know for sure the fate of the tax bill in the Senate, and we already know and have reviewed the tax bill in the House. The headlines at 3:50 PM ET on November 30th read “G.O.P. Lines Up Tax Bill Votes in Senate; Analysis Says Cuts Add $1 Trillion to Deficit” I would scream and hide under the bed, except for the fact that the national debt is already at 20 trillion and change already, and also if that was the biggest problem. The unfunded Social Security obligations of $32 trillion* and massive Medicare obligations make the deficit a small problem, as according to many sources and articles too numerous to list,[…]
Every year all around America almost every tax preparer asks the question, “Do you have charitable deductions like donations?” The answer is often, “yes 500.00 at Goodwill, Salvation Army and others.” That answer although widely excepted is not defensible at audit so why not use the pre-holiday season to send your clients a few tips on how to easily and properly document those gifts in order to prove your value as a planner that cares about them. It`s a great excuse to dove tail that call into a request for an appointment between Thanksgiving and the end of year to talk about other more valuable tax saving opportunity that expire atmidnight when the new year’s eve ball drops! Cash is Cash[…]
IRS Gives Tax Relief to Victims of Hurricane Irma; Like Harvey, Extension Filers Have Until Jan. 31 to File; Additional Relief Planned WASHINGTON –– Hurricane Irma victims in parts of Florida and elsewhere have until Jan. 31, 2018, to file certain individual and business tax returns and make certain tax payments, the Internal Revenue Service announced today. Today’s relief parallels that granted last month to victims of Hurricane Harvey. This includes an additional filing extension for taxpayers with valid extensions that run out on Oct. 16, and businesses with extensions that run out on Sept. 15. “This has been a devastating storm for the Southeastern part of the country, and the IRS will move quickly to provide tax relief for[…]
Tax-Exempt Organizations Affected by Hurricanes Harvey and Irma Granted Tax Relief Tax-exempt organizations in parts of Texas, Florida, Puerto Rico and the Virgin Islands may qualify for tax relief from the IRS. Organizations may get some extra time to file returns if they: are in the Hurricane Harvey and Hurricane Irma disaster areas, and have a filing due date after the hurricane hit and before Jan. 31, 2018. These organizations now have until Jan. 31, 2018 to file. The relief applies to original and extended due dates in this period. The start date of the relief varies by area. Texas: Aug. 23, 2017 Florida: Sept. 4, 2017 Puerto Rico and the Virgin Islands: Sept. 5, 2017 About annual information returns for tax-exempt organizations: Most organizations[…]
Like Harvey, Retirement Plans Can Make Loans, Hardship Distributions to Victims of Hurricane Irma WASHINGTON —The Internal Revenue Service today announced that 401(k)s and similar employer-sponsored retirement plans can make loans and hardship distributions to victims of Hurricane Irma and members of their families. This is similar to relief provided last month to victims of Hurricane Harvey. Participants in 401(k) plans, employees of public schools and tax-exempt organizations with 403(b) tax-sheltered annuities, as well as state and local government employees with 457(b) deferred-compensation plans may be eligible to take advantage of these streamlined loan procedures and liberalized hardship distribution rules. Though IRA participants are barred from taking out loans, they may be eligible to receive distributions under liberalized procedures. Retirement plans[…]
Seven days from now is the real tax filing deadline for 1041 (trust), 1065 (partnerships), 1120S (S Corps) returns that requested an extension in 2016. We often sift through our client and sometimes even prospects lists in our office and reach out on the 8th of September to “check in” and remind folks that a week from now we must be filing a tax return. People with trust income, run businesses and or have partnerships are often busy folks, and the date can sneak up on them. Then, you throw in distractions like Harvey, Irma (way more than simple distractions!) and yesterday EQUIFAX being hacked and everyone scrambling to protect their credit, and it’s not hard to imagine someone looking[…]
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, 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[…]