Joplin Tax Expert’s Opinion Piece On The Consequences of Our Tax Code

Joplin Tax Expert’s Opinion Piece On The Consequences of Our Tax Code

The inauguration happens today, as I write this.

For 47% of my clients (give or take), it’s not a very significant day, I suppose. Which means that 53% (give or take) are perhaps feeling hopeful, as well.

For us here at Team Erickson …  well, things are heating up. Tax documents are trickling out (organizations have until Jan. 31 to send everything your way), the long form 1040 was officially posted last week on the IRS site … and our phone here in our Joplin tax office has begun to ring with regularity [(417) 782-3021 in case you need it!].

So make sure you call us soon to set up a time where we can go through your situation with you. After all, would you rather spend 18 hours going it alone, or have your trusted advisor do it for you?

But a couple quick tax items, regardless of how you prepare:
1) Here’s the list of forms you should be looking for in the mail, and online (from any employer, vendor, client or anyone else with whom you had a taxable transaction last year):
* Wage earners, watch for your W-2 forms, one from each employer.
* “Other income” (like a state tax refund, or government benefits) is shown to you on Form 1099-G
* Prize winningsForm W-2G
* Most canceled debt (but not all) is reported as taxable. In which case, you’ll get Form 1099-C
as I’m writing this, I realize the list is extremely long. Here’s a good place for the whole list: [look under the section “Information Returns”]

2) Well, this one’s not a tax item per se, but something which should give you incentive to get your information together more quickly is at the end of this article.

Now, for my primary message, on unintended consequences…

Joplin Tax Expert’s Opinion Piece On The Consequences of Our Tax Code
Every year, I sit down with families here in Joplin who made a particular financial move, and as a result, some unforeseen — and unintended consequence — kicked in. This could be an unexpected tax event, it may have been a broken relationship, or a business failure. (All of which and more, by the way, is why you should be sure to ask us about tax PLANNING this year, rather than tax “reporting” — which is what the tax return preparation process really is.)

But sometimes these consequences are because of the tax code itself.

Take marriage, for example.

The foundations of most civilizations function on the principle that children are best raised in a home by two parents in a committed relationship. As such, couples have always been encouraged to marry.

(My point in this article, by the way, is about what’s in the tax code, and how it encourages social change. So this is NOT at all to speak of anything related to the special heroism which is single parenthood.)

But for many couples, our current tax code actually discourages marriage, and I think it’s a shame.

Here’s how it does so…

An individual who is working but makes a smaller income qualifies for the “Earned Income Tax Credit” (EITC). It’s refundable, which means that whether you owe that amount in tax or not, you may still receive it as a refund.

The amount is calculated based on your salary, filing status and number of children. There is a plateau at which point the amount of the credit goes down.

Without going into all the math, let me show you an example:
If you and your partner are not married but have two children, you have some flexibility. Each of you can earn $17,100 and still collect the maximum $3,169 for a total of $6,338.

A married couple, on the other hand, with two children earning the same $34,200 would only collect $2,735. The formula “penalizes” them $3,603, or 10.5% of their salaries, simply because they are legally married.

And the marriage penalty only increases as income and the number of children rise. The”penalty” can be as high as $8,400 when compared against unmarried couples in certain salary levels.

This should be sobering to us as a society. I have no problem whatsoever with each individual making their own choices in these matters. And the EITC receives support from all parties because it’s an incentive to work (it only is received when there is a job in place). But we shouldn’t disincentivize a civilizational building block through our tax code. (And I also hope that a few thousand dollars doesn’t keep people from embracing the richness available to them in marriage!)

One solution could be to extend it to all individuals equally, regardless of marital status. But the point I want to get across is this: our choices have consequences, many of which aren’t immediately apparent. So be wise, and have a guide as you make tax and financial decisions moving forward.

It helps to have someone who’s seen the road ahead.

To your family’s financial and emotional peace…

Special Early 2013 Offer
$29.00 Off Any Tax Service
Special Gift Certificate
Print This and bring it to our office–and receive an instant $29 credit towards any tax or financial service for 2013
Expires February 15th, 2013
Not valid with any other offer

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Joplin Tax Expert Gives Concrete Steps For Making 2013 The Year You Finally Get It Done

Joplin Tax Expert Gives Concrete Steps For Making 2013 The Year You Finally Get It Done

Maybe it’s because saying this makes the work we do here in my Joplin tax office seem all-the-more essential (alright, guilty as charged), but the ever-increasing complexity of our tax code is becoming a significant problem. The Form 1040 instructions estimate that on average it takes a taxpayer around 18 hours to complete a tax return.

And that’s the average. And speaking of average, there have been approximately 4,680 changes to the U.S. tax code (let alone the states) since 2001, which is an average of more than one per day.

And when you print out the *guidance* explaining the tax code, it’s over 1-foot high. Let alone the 4 million words of the code itself.

So, I guess all of this is to say — there’s a reason we do what we do. We get to cut through the fog of all of this complexity and ensure that YOU are protected from the grasping hands of the IRS and its minions. It’s part of what makes what I do so rewarding.

Now, before I get into the meat of what I want to talk about today, I wanted to highlight a couple things from last week:

1) The IRS is not accepting most individual tax returns until January 30th. Due to the last-minute nature of the tax bill passing Congress, their systems have a lot of catching up to do, apparently. Which does NOT mean that we cannot meet with you or *work* on your return before that point. Only that we won’t be able to officially “file” it until that week.

2) There is something at the end of this post that you might be grateful for.

Now, onto my main exhortation for the week …

Joplin Tax Expert Gives Concrete Steps For Making 2013 The Year You Finally Get It Done
I’m fully aware that just a couple weeks ago, right here on my blog for our Joplin tax preparation service, I wrote you about my simple “one word resolution”. So this isn’t about making another new year’s resolution.

This is about finally becoming a saver, instead of a spender. It’s about much more than retirement, but let me scare you with this: for every seven years you delay saving and investing for the future, you will likely cut in half the income you would enjoy at the end of your life.

Ouch. So, let’s make this year the year that we get this thing moving, shall we?

Here are some ways to get off your hind end and get it done…

1) Set goals you’ll actually keep. First, ask the right questions about what you are wanting to do with your resources and stay the course until you’ve found the answers. Then share what you are doing with someone you trust (I’m happy to be this person for you!) — because goals that are shared are ten times more likely to be acted on. Don’t wait until you have everything set up to seek out accountability.

2) Write down your goals, and make them tangible. Set your savings goals as a specific annual percentage of your adjusted gross income (AGI). It’s a great starting point to save at least 10% of your AGI in tax-free retirement accounts and another 5% toward retirement in taxable investments. If you are behind on your savings, you may want to save even more in order to catch up.

3) Come up with an actual financial strategy besides “save more”. Look at retirement vehicles, such as annuities, tax-savings plans, etc. Start by investing just enough to get the entire match from a company’s 401(k) plan (if you have one) and then fund your Roth IRA accounts next. After these two, make certain you have enough non-retirement savings.

4) Set it and forget it. I bold this one, because it’s huge. Automating putting money in an employer-defined contribution plan is easy. Automating a taxable savings plan is just as painless. Most banks or brokers offer an automatic money link between an investment account and a checking account. They should also offer a monthly automatic transfer between the two accounts.

Going into further detail would actually entail sitting down and creating a true, full financial plan–so just give us a call, to discuss your particular situation and goals: (417) 782-3021

But I will say one last thing: the most critical component of wealth management in the new year will be tax minimization. With the potential for inflation rates to fluctuate even more than the stock market in 2013, and for the many different ways creeping at us by which the government will seek to add “revenue” (some of which are hidden even from avid watchers like myself), it’s never been more important to monitor what “Uncle Sam” is seeking to take from your wallet!

To your family’s financial and emotional peace…

Special Early 2013 Offer
$29.00 Off Any Tax Service
Special Gift Certificate

Print This and bring it to our office–and receive an instant $29 credit towards any tax or financial service for 2013
Expires February 15th, 2013
Not valid with any other offer


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Your Favorite Joplin Tax Preparer Shares A One-Word Resolution

Your Favorite Joplin Tax Preparer Shares A One-Word Resolution

Happy 2013 to you, my friend, from your favorite Joplin tax preparation service! I am so honored that you take the time to read my weekly musings here, and very much look forward to the opportunity to help serve you and your family during this coming year. We’ve been watching the Congressional maneuvers the past few days, and, well — we’re all going to need to be careful with our tax-related decisions this year.

And yes, having paid some attention New Year’s Eve, and on New Year’s Day … let’s just say that sometimes the political sausage-making is on such “glorious” display, that it’s hard not to avoid the conclusion that our political class is broken.

(But I should also say that I don’t covet their jobs, that’s for sure!)

I’ve been holding my fire on this Note, wanting the details on a fully-passed bill … but, as I wrote this (mid-day on Tuesday here in Joplin), we only had a deal in the Senate. The deal seems to have survived according to the Senate plan, but there’s so much in there from a tax standpoint that I’m not going to do a full debriefing with you, until we can digest the full details — which we’ll have many months to cover.

That said, here are the major tax highlights:

Bush-era income tax rates (10%, 15, 25, 28, 33 and 35% for each income bracket) will be the “permanent” law of the land (whatever permanent means to Congress!) for single filers making less than $400K and marrieds filing jointly making less than $450K
• Capital gains and qualified dividends increase to 20% — but only for those single filers  and marrieds making more than the thresholds just mentioned. For everyone else, capital gains stays at 15% (and nothing for those in the 10 and 15% brackets)
• Various deductions were retained, including:
• Educator expenses above-the-line deduction
• Mortgage debt cancellation relief
• Employer provided mass transit and parking benefits
• Private mortgage insurance (PMI) itemized deduction
• Tuition and fees above-the-line deduction
• Required minimum distribution (RMD) direct rollover to charity

The best part for we tax professionals is that the AMT was permanently “patched”, which means that there *should* be no delay in e-filing for this tax season!

Beyond the specifics of the deal, the process was terrible, in my opinion. Even though lawmakers knew this reality was coming for two years (on the tax side), they waited until New Year’s Eve to strike a deal that passed through the Senate at 2 a.m. on New Year’s Day. The public had very little chance to review — let alone understand — the legislation. So much for transparency.

But I digress … we’ll see more, in the ensuing weeks.

Until then, I will leave you today with a brief meditation on a simplified New Year’s resolution…

Your Favorite Joplin Tax Preparer Shares A One-Word Resolution
If I hadn’t been glued to C-SPAN the past couple days, I almost might have missed all of the emails, Facebook postings and newspaper articles about the resolutions everyone is making.

But I didn’t. They’re ubiquitous.

In all seriousness, let’s review the most common resolutions:

Lose weight and get fit, quit smoking, read more and watch less, earn more, waste less time, etc. etc.

Heck, you might as well get out last year’s list and just change the date at the top … am I right?

(Or you might be the kind who wants to lower the bar: grow fatter, take up a bad habit, watch more TV, have less of that pesky money stuff to bother you, and waste more time.)

Now, far be it from me to suggest that these aren’t worthy goals. Eliminating bad habits helps you to focus and accomplish more of what you need to do in life.

And all of the advice we receive about *how* to implement these goals are also well-worn: “Share your list with friends” (which many seem to do), “be more specific” in your goals”, “chart your progress”, etc. etc. All of these are wonderful suggestions.

But instead of all that, I’m going to suggest a simplified approach. You see, as I’ve watched the media this year (and even among some acquaintances), I’ve noticed a disturbing trend towards blaming others for our problems, and “waiting for our chance” to be handed to us by life.

So here is what I would say to my friends who want a simple resolution: Instead of waiting for someone to open your doors, why not just direct everything toward being the one who opens them, as a rule?

In a word: Inspire.

Think about it. How differently would you attack your own resolution list … if you knew that your success would move someone you care about to be greater too?

After all, if you had to inspire someone this year, by being or at least visibly trying to be what great people aspire to be, what would you do differently?

Now go and do it.

Talk again next week…

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A Joplin Tax Pro’s Guide To Common Sense Social Media Privacy

A Joplin Tax Pro’s Guide To Common Sense Social Media Privacy

I don’t know about you, but here at Team Erickson, we are all still recovering from the shock of Newtown this week at our Joplin tax preparation office. Our thoughts and prayers have stayed there, for sure.

As for me, I’m continually having to resist the urge to delve overly deeply into the story, because, in this case, I’m not sure there is much to be truly gained by a more sustained and deep look.

In fact, I urge you to consider the “fruit” which comes from continual diving into all of the details of these kinds of stories.
It’s not always good. Yes, it can provide something to discuss at all of the holiday parties this upcoming weekend … and we can pray for the victims’ loved ones … but dwelling on what is truly horrifying can also break something inside your soul.

Hey — I’m a simple Joplin tax pro. We’re not supposed to have an opinion on such things. But I’m also someone who knows what can happen with a diet of “too much media”.

On a completely separate note, but speaking further of taxes, last week I wrote about giving, no matter what happens with the tax rates … and looking back now, perhaps it was more prescient than I realized. No news breaking on it, but this week there have been many more articles and opinion pieces flowing around about eliminating or capping the charitable deduction break.

Opposing views:

So, in that sense at least, perhaps 2012 really is the best time to give.

Now, this is the week in which many of my clients and friends choose to travel for the holidays. And, not coincidentally, it’s also a season when the robbers like to make a play or two. Let’s not make it easy on them, shall we?

A Joplin Tax Pro’s Guide To Common Sense Social Media Privacy
Recently, many people on Facebook were posting their own little “legal notice” to their Facebook accounts, as if it would have any kind of impact on the legal status of what they put there.

Here’s the truth:

The best “privacy policy” I know of? If you don’t want someone to see it, don’t post it on Facebook.

Yet, people using Facebook, Twitter and other networks (even those with serious privacy controls) are thoughtlessly giving actionable intelligence to thieves.  I believe that an awful lot of people think when they get online and communicate with their friends that they are invincible. A seemingly benign post or piece of information could make you a target of identity thieves and traditional crooks.

So, to protect yourself, here are five things you should avoid posting online…

1. Date of birth.
Really? Must you get random birthday greetings from elementary school friends? Almost 60% of social networkers post their date of birth, according to a survey by Identity Theft 911. But resist the urge to post your complete birth date — including the year — on your Facebook profile just to get a lot of messages on your big day. This is extremely valuable information for identity thieves. I know — you’re thinking only your friends see what you post. But if someone does a search for your name, that person will see often your birth date if it’s listed in your profile.

2. Child’s date of birth.
When you post “Happy Birthday to my sweet Maddie, who turns 5 today,” you’re giving identity thieves valuable information about your child. When it comes to your kids, resist the urge to post any information about them. In fact, there are even more malevolent actors out there who can use this information for more than just identity theft.

3. Travel plans. I bet you’ve seen Facebook posts like this: “We’re going to the beach next week. Can’t wait!” In fact, you may be guilty of it yourself — but according to the research I’ve recently seen, 18% of social network users post travel times.

Guess what? You’ve just extended an invitation for people to burglarize your home. In fact, recently three men in New Hampshire burglarized more than 18 homes by checking Facebook status updates to see when people wouldn’t be home. Pro-Tip: Make sure anything travel-related is set to ONLY show to your trusted friends. If you see the little “globe” icon below your post, that means it’s out there for the world to see. Fix that.

4. Address.
If your address is on your profile AND you let people know when you’re going out of town, well, you know where I’m going with this. Nonetheless, 21% of social network users post their address.

5. Mother’s maiden name.
It may seem like common sense to not post your mother’s maiden name on a social networking site, but about 11% said they did. Identity thieves will hit the jackpot if you reveal this bit of information online.

Not only should you avoid posting any of this information, but also you should fix your Facebook settings to control who sees what on your page.

Further, use different passwords for social media sites than you use for financial sites, such as your bank or credit card site.

I hope this helps!

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Joplin Tax Expert Makes A Case For Five Reasons To Give, No Matter The Tax Rates

Joplin Tax Expert Makes A Case For Five Reasons To Give, No Matter The Tax Rates

I’m once again spending my morning here in my Joplin tax office scattershooting around news in the tax industry, while simultaneously preparing for a sure-to-be-busier tax season (thanks for all the recent referrals — keep ‘em coming!) AND navigating the perils of another holiday season … well, it means one busy Jim!

Seriously, we’re getting excited about what is our most intense season of the year — TAX time.

In between cookies and egg nog, we’re boning up on all of the official tax law changes (while currently assuming that we’re about to drive off that fiscal cliff), and we’re meeting with clients for last-minute tax-planning.

[Which, based on what we’re seeing in our meetings, could be a VERY good idea for you too. Give us a call: (417) 782-3021 ]

But, of course, I’m still interested in making my annual plea for something which is not only the needed lifeblood for millions of people and organizations, but which also does something substantially significant for YOU.

Here’s what I mean…

Joplin Tax Expert Makes A Case For Five Reasons To Give, No Matter The Tax Rates
When we advise about or help set up GRATs, as with other tax-saving mechanisms for clients here in Joplin (and beyond) to deliver their philanthropy and giving (outside of normal tax deductions), there’s much discussion about the benefits of the gift for the recipient.

But what about for the giver?

This doesn’t quite work, when the “giver” is an estate or a trust — but since I’m not writing to a bunch of estates (I’m writing to real people!), I’ll proceed with some strong words about WHY you should be giving, no matter how effectively your money is spent!

1. Your emotions change.
Studies show ( that when individuals spend money on gifts for friends or charitable organizations, their happiness increases — while those who spend on themselves get no such boost. Even Scrooge can agree that everyone wins.

2. You can double your money.
Instead of simply sending off your money, why not find out if anyone is offering to match? Sites like have lists of companies that will match your charitable contribution. Find one you like and suddenly your contribution goes twice as far!

3. You might just spend it on something dumb, anyway.
As pious as you are, there’s still extra money in your budget somewhere. Create a budget for charity donations, then take some of your extra money (each month or each year) and donate it to charity. Use your spending money to make a difference instead of spending it on Brookstone junk you’ll use once. And if you think you don’t have enough, take that extra 2% you’ll be earning next year and put that toward a charity fund. For someone making $100,000, that’s $2,000.00!

4. It’s probably now or never.
Don’t pretend that instead of giving money, you’re going to donate time. When was the last time you volunteered at a soup kitchen? Don’t let your mind fall for this trick. Send the money now or you’ll end up giving nothing.

5. Get ahead of your heart.
This is the biggie, in my opinion. There’s just something that happens in your psyche when you cut a big (or relatively big) check to someone in need, or to a charity organization. You feel more powerful–more dynamic. You signal to your own unconscious: “Money doesn’t rule me. I have more than enough, so much more than enough that I’m giving it away.”

Then, of course, something special often happens: more money seems to find itself in your hands.

I’m not advocating a mystical pay-it-forward scheme; I’m simply making the observation over years of being a student of how money “works”. And, it just seems to find itself in the hands of those who give it away.

So–was any of this convincing? Did it help you see things in a new light? Let me know…

Because I hope this was simple and straight–as usual.

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Your Trusted Joplin Tax Service Recommends A Holiday Financial House Cleaning

Your Trusted Joplin Tax Service Recommends A Holiday Financial House Cleaning

So, all of this “fiscal cliff” talk is just about ready to make this here Joplin tax preparer a little crazy. Every year, there’s some new crisis which Congress has to avert — and usually (with all respect to our legislators), they let us down.

This year … well, the White House and Republican leaders remain far apart (as of this writing) on whether to raise taxes for the “rich”, bringing talks aimed at avoiding the dreaded cliff to a halt. And, while preparing to watch football, I saw that both sides used the Sunday political shows to accuse the other of refusing to compromise on taxes. “We’re nowhere,” said House Speaker John Boehner.

And everyone, everywhere, is warning of the consequences if things don’t change this month. And they wouldn’t be wrong. Regardless, do NOT allow yourself to walk into 2013 without a tax-reduction plan. And, of course, that’s somewhat self-serving — we handle this stuff in our Joplin tax preparation office, of course ((417) 782-3021) … but it doesn’t mean it’s untrue.

And here’s a great place for you to start …

Your Trusted Joplin Tax Service Recommends A Holiday Financial House Cleaning
If you’re like most people, I bet that when you get your homeowner’s insurance renewal notice, you quickly glance at the price — and renew it.  You renew it simply because you don’t have the time to search around for better prices.

In my experience, working with family finances for YEARS, I’ve learned that most people in the Joplin area have a good sense of what needs to be done to improve their finances but they simply cannot find the time.

So here’s my proposed solution for you:  Take a day off work before the jingle bells stop ringing, and get some financial stuff
done (finally).

In fact, many financial tasks simply cannot be completed in the evening or on the weekend.  By taking a day off work, you can contact people who may only be available at regular business hours.

On top of the true bottom-line impact a day like this could create, there is, of course, the “mental health” aspect of it all. HR professionals often recommend taking a mental health day, from time to time — well, call this your “Fiscal Health” Day.

Possible tasks to consider accomplishing on your day off:

1. Dump your savings account with a puny interest rate and open a high-yield savings account. If you’re older, look into an annuity.
2. Get quotes for cheaper insurance: health, life, auto, house, and any other insurance. And you can even do a little calculation to determine how much you could save by changing your deductible.
3. Complete the most important (but not as obviously-pressing) financial tasks like making a will. Like your taxes, this is best done with a professional, by the way.
4. If you’re carrying credit card debt, call the companies and ask them to reduce your credit card interest rates. Believe it or not–they’ll often say yes! Take time to develop and formulate a good plan to get out of credit card debt.  Find or prepare a debt reduction plan.
5. Get more organized with your finances by shopping around for and using a good personal finance software program.
6. Review your budget, get caught up on your budget, or learn how to budget.
7. Shop around for the best online broker.  Be sure you’re getting the best price for your stock trades.
8. Make energy-efficient changes to your home and lifestyle.
9. Find a good second-hand store to shop at instead of the local department store.
10. Set up automatic payments for your bills to be sure you avoid late payments.
11. Google It.  Use the phrase “how to save money”, and then fill in the blank “on groceries”, “on gasoline”, “on kitchen expenses”, “on babies” …
12. Sell stuff on Ebay or Craigslist. Look for junk lying around the house and list it on one of these sites.

Undoubtedly, there are more things which can go on this list, if you’re industrious about it. But simply put, I’m hoping to give you “permission” to see your financial health in a similar light as you see your mental health.

Thanks, again, for your time in reading my thoughts. And we thrive based on your referrals, and are truly grateful for them. Keep in touch. (417) 782-3021

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Joplin Tax Preparation Service Shares Holiday Tax Moves for 2012 (“Before The Cliff” Series Part 2)

Joplin Tax Preparation Service Shares Holiday Tax Moves for 2012 (“Before The Cliff” Series Part 2)

I’m not sure that it’s possible for me to actually be saying this, but I am: I think I’m tired of turkey-stuffing sandwiches. (But check with me a couple hours from now.)

In all seriousness, this week after Thanksgiving is the time when our preparation for the upcoming Joplin tax service season begins in earnest. Truly, things are coming across my desk in a way that we haven’t seen for a few months, but I’ve come to expect it for this time of the year for Team Erickson. I absolutely love what I get to do … but it does add some oomph to the “holiday rush”.

And one of the primary things we do right now is the rush of last-minute tax planning moves. Because as I’ve said before, preparing a tax return is a defensive, retrospective action … but making the right moves ahead of time is going on the offensive, and affects the future.

Which means I like that far better for you.

So here are some ideas, as we all hurtle towards this cliff everyone keeps talking about …

Joplin Tax Preparation Service Shares Holiday Tax Moves for 2012 (“Before The Cliff” Series Part 2)
So, yes — there is a fiscal cliff looming, hurtling, flying, crashing towards all of us here in Joplin (pick your metaphor, they all work).

You might think that this means that everything is cut and dry. A simple strategy might be to simply take as much income and capital gains as possible for this year, 2012 … and defer as many expenses into 2013 as you can.

There is much to be said for this strategy.
However, I also recommend that you have someone who knows what they’re doing [ahem] speak directly into YOUR particular situation, because there are some wrinkles.

As usual, we are waiting on Congress to resolve some problems. For example, the IRS on Nov. 13 warned lawmakers that if they don’t act soon, the alternative minimum tax, which reduces the value of some tax breaks, will apply to 33 million households for 2012 rather than four million. More than 60 million people might not be able to file returns or receive refunds until late March, the IRS says, because “it would have to reprogram computers”. (Those must be some complicated computers!)

But regardless, here are a few moves to make, with wrinkles and cliffs in mind …
Send an extra mortgage payment. Usually we can’t accelerate more than one month of mortgage interest for you, but that could help out if you want to act in the not-unlikely case that the mortgage-interest deduction will be curbed next year. Either way, it’s always good to pay down principal, which reduces overall interest.

For parents of college students:
Write next semester’s tuition checks before year end. The American Opportunity Tax Credit allows qualified taxpayers to get a benefit this year for next spring’s tuition if the payment is made before year end–even though the credit is set to expire for 2013. For more information, see IRS Publication 970.

For givers:
Set up a “Donor-Advised Fund”. With renewed talk of the charitable donation credit being reduced or going away (I’m agnostic on whether it will actually do so), you wouldn’t be crazy to plan ahead for it. If you’re planning charitable gifts in the future, make a large donation to a “donor-advised” fund and qualify for a full write-off this year. Assets can then grow tax-free in the fund until we specify tax-free recipients, which can sometimes be years later. (There’s no deduction at that point.) We can help you with that.

Spend up your FSA funds, ASAP.
They often don’t carry over, although some employers will allow workers to spend 2012 funds in the first weeks of 2013. Next year, the contribution limit will be $2,500, less than some employers now allow.

All of these issues are things we routinely assist with on behalf of our clients. If you want to talk over these, or other similar strategies, call us right away ((417) 782-3021), and we’ll figure out a time to connect more fully.

Don’t fear the cliff. Prepare for it. It’s all that any of us can do, anyway…

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Thank You

Thank You

Before I get into the meat of my blog post, I’ve had a few clients here around the Joplin tax office ask me a variation on the below … so I thought I’d put a quick tax-planning idea here right at the top:

Jim Erickson’s Seasonal Tax Advice for November 2012
Consider postponing your charitable giving until January 2013. This will increase your taxable income this year while your rates are low and decrease your taxable income next year when the rates are higher. And whichever year you do your charitable giving, gift appreciated stock whenever possible.

But please do give! And we are here to help you think through your particular situation: (417) 782-3021

(And if you have involvement with a non-profit, church or other donation-driven enterprise whether around Joplin or nationally, it’s an interesting idea for you to integrate into your end-of-year giving appeals. Your smart donors are likely thinking about this very thing, and you should understand why — and, even, contact them at the beginning of the year, and/or facilitate their giving after December 31.)

To the nub of my post here … things are slow around here this week, and it always puts me in a meditative mood. Thanksgiving is nice because it’s not quite yet the “calm before the storm” which the December holidays represent (right before tax season, as they are). This is a week when I get to gear up to provide the best tax service in the Joplin area … but do so by looking back.

First, I’m reminded of my firm’s many blessings.
For instance, I do NOT take for granted that you have chosen us to walk with you as we give you advice and help take care of your financial picture, especially around tax time. It’s hard to reveal the kind of personal information that you provide to us, and we don’t take it lightly.

And I also look back this week on the journey to get here.
As anyone who runs their own business will tell you, it’s a giant leap to go out “on your own”. I still remember what it was like to take this dream I had for my firm and put it into reality. I was a little bit scared, but I was hopeful. I remember the friends and other business-owners who helped me along the way … and how risky it all seemed.

Well, the risk DID pay off, and I’m happy about what we’ve been able to create around here. Now we get to be the ones helping people pursue THEIR dreams.

For a new business owner, the first step seems really big … until the next step comes!
And then you realize that running a business is a series of these decisions …you become a good risk-taker, if you stay in it for long.

But it sure helps to have somebody with a cold, clear eye to make sure you know what you’re getting into.

Which brings me to what I’m thankful for this November, as a business owner … and hopefully as your friend.

As I gather at my table with family and friends this week … I am thankful for you — and people like you. Thank you for your trust, for your business year after year … and for making my first step into starting and running a firm “way back when” so rewarding now.

And what I’m excited about as we head towards the end of 2012 … well, here’s to helping YOU keep the IRS off your back in 2013!

Looks like we’re all going to need it …

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Joplin Tax Service Suggests Getting a Real Checkup

Joplin Tax Service Suggests Getting a Real Checkup

Well, here we are after the election, with the status quo being upheld. Billions were spent (probably making some “consultants” do quite well in the process), and we were all very distracted here in Joplin … but not much has changed, even for our tax office. Many are happy about it, an ever-so-slight number less aren’t happy — but to all I will say this:

Over the next four years, what you do will have a larger impact on your income, wealth and happiness than what any president does.

And yes — there will be many things for us to help you navigate, because come 2013, there WILL be some significant changes.

With the election behind us, we can expect some traction on the debt limit negotiations, and further discussion of the “fiscal cliff”. But taxes WILL go up next year … whether it’s directly on your income, or in other more-hidden ways. So, as your favorite Joplin tax service, my primary quick-and-dirty tax planning maneuver for you is this: take as much income THIS YEAR as possible, and defer tax-deductible expenses until after December 31, whenever possible.

(If you want more a more detailed breakdown behind this strategy, don’t miss this:

But there are some other things which the winding-down of the year should cause you to consider, and this is especially true if you are hitting the “middle” of your own road. Here’s what I mean…

Joplin Tax Service Suggests Getting a Real Checkup
Generally speaking, many wise adults see a doctor when they hit 50. And the great thing about (most) doctors, is that they’re not financially-incentivized to advise you towards a specific course of action.

Would that were true about all financial investment advisers.

So, I thought I would take the time this week to give you an objective, “incentive-free” look at what your finances should look like when you hit the half-century mark.  If you are close to that mark, I thought it might be useful for me to lay out the “perfect” scenario.

And look–if you’re not perfect, at least let it be a benchmark…

We should have been saving and investing 15% of our income regularly.
Even if we don’t want to retire until age 70, by 50 we should be well on our way toward securing our retirement. We have managed to save about eight times our annual lifestyle spending. With a $100,000 per year lifestyle, that means we should have saved about $800,000 toward our retirement.

We are probably at the point where our children are in college or have recently graduated. When college funding is complete, it’s time to reevaluate and perhaps drop term life insurance coverage depending on our individual circumstances. We purchased the insurance to make sure our children would have enough money to complete their education. When term premiums rise and college accounts are fully funded, we should probably drop our coverage.

Our estate plan should be in place and fully implemented.
And, of course, various assets are handled differently. This is the time to make a complete review of how our plan is put together, to ensure that EVERY asset (not just the tangible ones) are still handled properly.

And, for you “imperfect” savers, we have one last chance after children and before retirement to catch up. Age 50 is the first year we are allowed to take advantage of increased savings and catch-up provisions. In 2012, maximum savings in a 401(k) or 403(b) account increases from $17,000 to $22,500 at age 50. Roth contributions also increase from $5,500 a year to $6,500 with these “catch-up” provisions. If we don’t have eight times our lifestyle spending saved, now is the time to press these limits.

Of course, saving well is half the battle; investing well is the other half.

That’s a subject for another day, and which we can discuss more via phone, if you’d like: (417) 782-3021.

Of course life is too short to ignore meaning at any age. But for many people 50 is a milestone that reminds us to stop and reevaluate. There is still time for a whole new life of significance.

Financial independence can open exciting possibilities that were otherwise out of the question. If we don’t need the money, we are free to do anything with our lives. People of purpose usually don’t choose 28 years of recreation. Not when we finally have the time and the wisdom to make a difference in the world.

And counting retirement as a new career is a perspective I’d encourage. When you reach the point in your life where you can celebrate the freedom to work instead of the freedom from work, that’s success. If just a fraction of people in the second half of life turn their experience, time and talent to our nation’s most pressing challenges, imagine the progress we could make.

Although you can have that attitude at any age, it is especially powerful when redefining the second half of your life!

All of these issues are things we routinely assist with on behalf of our clients. If you haven’t yet set any of these items into place, call us right away ((417) 782-3021), and we’ll either help you, or connect you with someone who can.

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Your Favorite Joplin Tax Service Breaks Down Three “Must-Do’s” For Responsible Parents

Your Favorite Joplin Tax Service Breaks Down Three “Must-Do’s” For Responsible Parents

First a little warning. I’m taking the time to type this, as I always do, on Monday morning. Frankly, it’s just a perfect way for me to start my week here at our little Joplin tax service. Our office processes are such that the post actually gets put on the website sometime later, depending on client and workflow.

And I hear something is happening this Tuesday?
(I don’t know … might be a rumor.)

The point being, I’m going to save my election analysis for next week, after which point (presumably!) we’ll know our next President, and Congressional make-up. And at which point, you’ll get “Jim Erickson’s Take On Post-Election Taxes” for Joplin area families :).

I’ll do my darnedest to put together a clear, actionable “post-mortem” on the election, and what it might mean for YOUR finances and taxes. Frankly, the Congressional results matter a little more on that front than does the Presidential one, but obviously the future of the ACHA law (“Obamacare”) also seems to hinge on the Presidential outcome. Here in Joplin, as across the country, we wait with bated breath.

And we shall see, won’t we! (I considered writing two versions of this, depending on the outcome, but that seemed a little silly … and there is still a chance we won’t know the outcome until a few days later anyway.)

Now, a couple important items before I get to my article:
1) If you’ve been affected by Sandy, we are standing with you.
There are some federal breaks available … but you should also know that the tax code can hold some traps for those seeking help.
Call us (when things have settled, of course!) and let us help you! (417) 782-3021

2) Did you see George Lucas’ Jedi move?He sold his business THIS YEAR — before the tax code changes kick in. Smart stuff, right there.
Do you have year-end moves that you should make now? Like taking more income this year than next, if you somehow have some discretion on it? Be sure to talk it through with us. This is, after all, what we do. (Ahem: (417) 782-3021 :))

Anyway, last week I wrote about teaching your children re: finances. But there’s another side to that story, and it involves how things would happen if a metaphorical “storm” were to strike your family… (hint: be as prepared for it as you can be, in advance).

Your Favorite Joplin Tax Service Breaks Down Three “Must-Do’s” For Responsible Parents
Many people think that because the “estate tax” threshold has been raised as high as it has, that estate planning is no longer very necessary.

Well, this issue is so much bigger than how much money Uncle Sam gets to take from an estate. You see, when I think about what frightens parents most, seeing their children in a vulnerable position pretty much tops the list–whether it’s at home, at the pool, or any other place in public.

What exacerbates this further is knowing the fear which children themselves feel when they are surrounded by people they don’t know, and aren’t sure what to expect from what their parents have set up for them.

Put the following steps into place, and you’ll eliminate at least some of these dangers…

#1: Identify a Clear Plan for the Care of your Children.
Did you know that 74% of parents have not named guardians? Worse, of the 26% who have, most have made 1 of 6 common mistakes that leave their kids at risk.

When you name short AND long-term guardians for the care of your children, you must give clear guidance to your caregiver and everyone you’ve named to care for your children, in written form. Just by naming these guardians (both short and long-term), your children never have to be put in a situation in which they would be taken out of your home and into the hands of strangers if something happens to you.

An even better step, if your children are old enough for this discussion, is to tell them this plan. Don’t make a big deal of it…you don’t want to frighten your kids at the prospect of your loss. But they’ll feel better knowing that you’ve selected people they can trust and love to care for them well.

#2: Properly Document Your Decisions
Parents often have discussed and agreed upon a guardian for their children and have even made their wishes known to their families; however, not documenting these decisions can result in your wishes not being followed when it really is too late.

You see, if you don’t communicate your wishes in a legally-binding document, you are placing your children in a “free for all”. Without clear legal guidance, every family member has equal priority of guardianship and the decision about the care of your children will be left in the hands of a broken-down court system and some judge who doesn’t know you or your kids.

This legal documentation is particularly important if you intend for a friend to care for your children, as courts will almost always choose a family member over a friend.

Also, don’t forget to leave behind specific guidance about how you want your children raised.  Education decisions, healthcare decisions, discipline decisions … these are all things you care a lot about and would want made consistent with your opinions for how your kids are raised.

#3: Don’t Neglect Their Financial Future
Sure, there’s different schools of thought on this issue. Some parents don’t want to overwhelm their children with too much in their bank accounts at once, which is understandable.

But, regardless of how you structure this provision, providing sufficient financial resources for your children’s care is your responsibility. And, as a responsible parent, you must take steps to protect what your children will receive … whether it’s through life insurance, savings or some other means.

To do so, establish a living trust, to receive any life insurance benefits your children would receive, so that they don’t get access to your assets at the age of 18; and make sure your living trust holds on to the title to any assets that would go through probate in the event of your death. And, if your estate is large enough, you will want to plan to avoid estate taxes as well.

All of these issues are things we routinely secure on behalf of our clients. If you haven’t yet set any of these items into place, call us right away ((417) 782-3021), and we’ll either help you, or connect you with someone who can.

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