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…Read More
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.
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: http://www.snopes.com/computer/facebook/privacy.asp
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!Read More
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 (http://www.livescience.com/health/080320-happiness-money.html) 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 www.DonationDoubler.org 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.Read More
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…Read More
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 …Read More
Some Mondays are harder than others.
That’s why I make it a point every Monday to sit down in my office here in Joplin, some caffeine in hand here at my desk and write to you–to lift your eyes, to remind you of what’s possible…and, in the doing, it does wonders for *my* state of mind.
Yes, even I can fall prey to the Monday Blues. That’s why I write, actually.
Because I get to remember the families we are privileged to walk with — through hard times, and good — and I get a shot of energy. When I think about the businesses we guide through the morass of this economy … well, it makes every Monday worthwhile.
Sure, “Monday Blues” is sort of cliche. But it got that way because it’s just the flat-out reality for so many.
Tax time blues are all-too-common, as well. But getting a “surprise” in March or April is 100% avoidable. Half of that task is complete when you work with the right professional [check!]; but the second half is to ensure you move NOW, when you still have time to set things up right.
A few good moves to make, right now, are below–plus, a little offer to make them even easier. Call us: [(417) 782-3021] to make it work for you …
Joplin’s Premier Tax Expert Explains More Autumnal Tax Moves Before The Cliff (Part 2)
Many of the tax breaks we’ve all been enjoying for almost a decade are set to expire at the end of the year. That’s the bad news.
Worse: some of my clients right here in Joplin, and beyond, will likely owe Uncle Sam more money next year — unless they do something about it. This is particularly true if you’re in the highest tax bracket, scheduled to go from 35 percent to 39.6 percent (even with a Romney victory, who has pledged to seek a lower tax bracket, a lame duck Congress is unlikely to play along). Also slated to increase are the tax rates on capital gains, currently at 15 percent for most investors.
But you can make some moves, my friend.
Move #1: If you fall into this higher-taxed category especially, accelerate income into this year so you’ll owe taxes on the money at today’s lower tax rates. Talk to your employer about moving any bonuses or commissions into 2012 (rather than ’13).
Move #2: Regardless of your tax bracket, it’s also an ideal time to cash in some long-term winners in your portfolio so you can take advantage of today’s lower capital gains tax rates.
Move #3: Next, anyone can convert a traditional IRA to a Roth, again regardless of your income. Another impending tax, the Medicare tax on high earners, also has created more incentive to convert to a Roth. This tax is part of the health care reform law and will apply to investment income of higher earners starting in 2013.
Sit down with us, and let’s explore whether moving to a Roth is right for you. We’ll run the numbers to determine whether you should pay all your Roth conversion taxes this year at lower rates — or sit tight. This could make a big difference, depending on the rates.
In review: Take as much income as possible NOW. Again, with Congressional inaction quite likely regardless of the presidential election’s outcome, it’s likely that the oft-discussed “fiscal cliff” will hit us. So, if you’re able to realize capital gains, or have your employer accelerate any of your income, or perhaps convert to a Roth IRA, doing so for this tax year will be extremely beneficial, compared to 2013.
There are more moves to make–but they depend on your particular situation. It would delight me and my staff to no end to have the chance to set you up for paying the least amount of taxes possible for 2012 … so, let’s do something about this, shall we?
$57.00 Towards Tax Planning Strategy Session
Print out this page and bring it to our office for a special strategy session for how you are using your income. We’ll identify the BEST ways for you to maximize your wealth for the current year, so that we won’t just be “cleaning up” after the fact. Time to protect yourself from the coming flood of new tax law changes!
Deadline: November 2nd, 2012
Limit: First 6 respondents only (we’re limited by capacity)
Call us ((417) 782-3021) now!
Say it with me now: Three weeks left in this election.
If you watched any football over the beautiful Joplin weekend, you probably had the thought: “Gee, this football is fine and everything, but what I’m really wanting to see are some more political ads!” What, you didn’t have that thought?
Sheesh … all the election coverage and political advertising is starting to feel like overkill, and we still have more to slog through. And then — it starts up again … about February-ish, it seems. It all gets pretty old.
Though I suppose the seeming perpetuity of our election cycles is a byproduct of the fact that we still have free speech here, and the freedom to spend our dollars the way we would like — and on messages that we want to be shared. And that is a very good thing.
Now … speaking of spending our dollars in the way we want, I had someone suggest this piece of advice to me early in my career, and it was good advice. Heck, it’s good advice for me NOW (and it was useful for me to put the article together, to clarify my mind on it all).
Simply put, I believe that this method is the BEST way to advance in a career, as a parent, or any other venture you’d like to pursue: ask someone who has gone ahead of you.
Best Joplin Tax Service Professional Explains Taking a Successful Person To Lunch
For those of you in the early stages in your career, this article might be worth more than many of the classes you took in college — if you follow my advice.
And, for those of you who are further along in your career … frankly, the advice still applies. I can’t tell you how many lunches (or coffees) I’ve been to with ill-prepared, meandering partners. And while some of the specifics of your questions might change, there simply isn’t a better way to build relationships with someone who is busy and successful. After all … they gotta eat!
Go somewhere easy — and YOU pay.
Nobody has time to meet you for a fancy dinner in the middle of a busy work day. A cup of coffee works because you pay in advance. You don’t want that awkward moment where you both wait for the bill to come, or to have the server interrupt you a dozen times.
And yes, you might be young and poor-ish. But if you’ve chosen your lunch partner properly, it’s simply good manners to ante up the $20-$30 (or less) to pay for their meal. This signals your valuing of their time, and it will build up good will.
Ask questions the entire time.
You convened the meal — so it is your turn to ask the questions, pick this person’s brain, and get as much feedback as you possibly can on your topic. I highly suggest that you come loaded with questions, ready to fire out.
Oh and there’s one thing about questions that you need to know…
Ask good questions.
Please don’t ask for their “best tips or advice”. That’s insufferably lame and they won’t know where to start. So make it a rule to not ask general questions, because you’ll simply get vague responses that won’t help you much.
So what are some good questions?
Well, that of course, does depend on your lunch mate, and your own goals for the time. But, for general-purpose networking, and learning the stories behind someone’s success, here are some good places to start:
- What did you do right after high school? What did you do after college? [You want to see what a successful person has done right after completing their studies. This will usually surprise you.]
- What does an average day look like in your life? I wonder if there’s time for video games?
- Who else do you work with? [This way, you can find out the other players involved in making their team work.]
- What would you do if…? Then you present a specific scenario — hopefully one that you’re experiencing yourself.
Don’t talk about yourself, unless asked directly.
Or, as The Rock used to say: “Know your role and shut your mouth.” This is your time to be all ears and become a sponge for information. Don’t give your input on every single comment.
Do some research.
Don’t walk in confused or clueless about what this person is all about. It’s important that you take some time to do your research and figure out exactly what this person has been working on. This will score you some bonus points. It pays to be interested. People want to know that their work is being taken seriously.
I do hope this will save you some embarrassment, and, even, open some doors for you that will take your career to the next level. Feel free to share this, of course!
We thrive based on your referrals, and are truly grateful for them. Thanks again.Read More
I’m just now beginning to realize how busy these next three months will be here at Team Erickson — and that’s before tax season even begins.
Just so you know, here’s the “normal” behind-the-scenes calendar for Joplin (and beyond) tax professionals:
- January-May: Hopped-up on caffeine, flying through tax season
- May-June: Recover
- July-August: Recover from the recovery, squeeze in some continuing education
- September-October: Tax planning and flurry of corporate taxes and extension work
- November: Brief recovery
- December: Get the coffee ready for tax season (and the office and staff)
- Rinse. Repeat.
Well, in case you haven’t heard, there are a few tax breaks which are set to expire on January 1, 2013 — and by a “few”, I mean loads of them. The government currently estimates that these tax increases will add 19% more revenue to their coffers at current economic output levels. So, do the math — taxes are going up pretty dramatically (unless something changes).
Commentators have taken to calling this situation “the fiscal cliff” (with a hat tip to Fed Chairman Ben Bernanke, who first used the term).
Which means that we’ll be VERY busy helping our smarter clients do what they can do to position their finances for maximum tax savings this year.
(If you want to be one of those smart clients, call us soon [(417) 782-3021], before our calendar completely fills.)
But, in the meantime, I’ll be posting here various quick-strategies which you should be using NOW, to avoid paying more than you should be to Uncle Sam in 2013. Here’s a first installment…
A Joplin Tax Accountant Explains How To Prepare For The Fiscal Cliff (Part 1)
Since the last article from Team Erickson was a bit on the long side, I’m going to keep this “Fiscal Cliff Series” short, sweet and actionable. After all, we’re all busy, we understand a cliff is hurtling our way — so let’s cut to the chase, shall we?
1) Start the gift-giving process NOW. That’s because the current federal tax exemption on estates and gifts is set to roll back on Jan. 1, 2013, from $5.12 million to $1 million — which is the same level it was at in 2002, before the “Bush Tax Cuts”.
And just as banks and mortgage brokers often encourage clients to “lock in today’s low rates,” I’m telling people to take advantage of this high exemption while it is still in effect. And this is often done by you (or your loved ones) making sizable gifts under the current limits so that they can reduce the size of the estate — and the potential tax hit — at the time of death.
Just as important, by the way: If you wait too long to begin the process, there is a good chance you won’t be able to complete the paperwork before year’s end.
So get cranking.
I’ll be back at you with more advice in the near future, my friend.Read More
The wonderful fall weekend here in Joplin was made a little more interesting for a tax professional / tax geek like me.
Our little tax world was abuzz on Friday afternoon, after the release of Mitt Romney’s 2011 tax return. He had filed for an extension, and his actual return was (finally) released by his campaign. It’s 379 glorious pages of tax geekery and voyeurism, and there were a few fun facts:
* Most of the Romneys’ income came from investment earnings, which generally are taxed at lower rates than ordinary, or wage, income. And all these calculations come to a 2011 effective tax rate for the Romneys of 14.1 percent.
* They donated just under 30% of their income to charity — which is remarkable, no matter what political persuasion you hold to … but here’s the part that has everyone abuzz:
* They only claimed 56% of those charitable deductions that were available to them. So, Romney intentionally overpaid his taxes, obviously to conform to the statements he had previously made about not ever paying less than a 13% tax rate.
Aside from the fact that Romney’s income would make him the 8th-highest-paid player on the New York Yankees, the very interesting question arises: After November 6th, will he amend his return to claim back the $1.77 million in charitable donations that he and and his wife didn’t include on their Schedule A, thereby getting a nice refund check of around $265,616?
If he wins, I’d put that as highly unlikely. But if he doesn’t win … well, I don’t think he accrued his fortune over the years by being dumb. We’ll probably never know, because as a private citizen, he’d be under no obligation to release any of these personal moves.
But it sure is fun to speculate!
By the way — to cut off some questions at the pass:
1) YOU still have until October 15th to get your extension to the IRS. If we’re working on that on your behalf, you can rest assured it will be done.
2) There is a 3-year window for amending prior returns. If you do NOT have us working on your behalf with your returns, let us know — we’d be glad to review any of your old returns, and you will only pay if we end up filing an amendment which saves you money!
Lastly, all of this talk of charitable contributions brings to mind what I have often conversed about with some clients, so I thought I’d bring it here…
Joplin Tax Professional On The Best Reasons To Give To Charity
We’re into the final quarter of 2012, and since this is the biggest quarter of the year for giving, I’d like to take the opportunity as your “financial coach” to make a few points about giving to charity.
Why *do* you give to charity? Is it for the tax deductions … or for a different reason?
Now, as a tax professional, I’ve got no problem helping my clients use all available deductions to their utmost, ethical advantage. But I love it when I see my clients and friends make giving decisions which seem to run counter to immediate, short-term self-interest in their giving.
And, I believe it’s actually “enlightened” self-interest in the long run. And not just in our sense of feeling good.
I see the balance sheets of folks from every walk of life, and over the years I’ve noticed an interesting phenomenon: individuals and families who make giving a priority, even when they aren’t “wealthy”, seem to do better in the long run. And I mean financially – not just in their state of mind.
(Though, there are great “state of mind” reasons for giving. Have you seen, as I have, that those who freely give seem to be more pleasant company?)
I make it a point to seek to observe how money works. And, for some reason — money gets attracted to those who aren’t in hot, desperate pursuit of it. It’s almost like in romance–potential lovers are usually turned off by the overly-aggressive seeker.
So, because of the looming fiscal realities in Washington, and the charitable deduction rate goes down from the current 35% of what you donate, may I suggest that you consider increasing your giving? You might be surprised by what happens in your heart.Read More
As Dana Carvey used to say on SNL, hear me now, but believe me later: there WILL be a “fiscal cliff”. And yes, as a Joplin tax service, it behooves me to say that yes, we will feel it here.
With all of the chaos bubbling in the Middle East, the back-and-forth distractions of the presidential campaign — and, of course, the everyday concerns of your life, it’s probably easy for “non-tax-professionals” to lose sight of the fact that there are some major tax changes on the horizon, for 2013.
Further, BECAUSE this is a campaign year, it’s that much less likely that Congress will do anything about it. And this isn’t even speaking to the debt limit issue!
The point I’m making is that these next few months and years will be extremely “interesting” for Joplin families … and it’s all the more reason why it’s so good that you have someone like me (the best Joplin tax service, if I may be so bold) in your corner. Because those who don’t have someone who can plan ahead on their behalf are going to be facing some significant increases in their tax burden, whether they like it or not.
Before the election, I will do an analysis of the different tax plans proposed by the presidential candidates (with a posture of aggressive neutrality!), which could give you some clarity on that aspect of things, but I’m going to keep my powder dry here, until we get closer.
Now — as we think about fiscal cliffs, this is a situation which some families fall into when kids start coming into the picture, and one spouse decides to stay home. Forgoing one income can sometimes FEEL like falling off a cliff, financially!
And, of course, this situation is already in play for those who are (heroically) raising children on their own.
So, I’m here this week for some practical advice, both for the stay-at-home-spouse families, and those who have no choice in the matter…
Joplin Tax Professional Explains Living On One Income
I’ve recommended before that couples who are ultimately planning on one person staying home with children, start running their finances and their budget that way from the beginning. That’s simply the best way to be prepared for what is to come.
I’ve also pointed out that one of the best times to save is before having children. But with marriage happening later and later in our culture (and the transition into parenthood for those marriages therefore happening perhaps a bit more quickly than it otherwise might), this important savings period has been crunched. So here’s some quick advice for those who are single: realize that you are saving now for your future family’s financial life.
That aside, here is some advice for those who are starting down this road toward a single income for their family, or even for those who already find themselves walking it out…
Take A Trial Run
I recommend that couples contemplating a stay-at-home arrangement first take a period of living as if they had only one income for at least three months before one of them quits a full-time job. They may find that even though their expenses will be cut for needs such as day care, transportation and clothing, they may find it hard to continue to dine out frequently or splurge in other ways. If that’s you, it’s a good idea to bolster an emergency fund to cover unexpected things that come up, such as household repairs.
It’s even better if this “trial run” can begin at the start of a marriage, which should allow for a fantastic period of saving before having children.
Life Insurance for Two
Couples should buy life insurance on both partners, not just on the working spouse. If the stay-at-home parent dies, the surviving spouse can use the benefits to pay for outside child care, live-in nannies, housekeepers and other functions that had formerly been handled by the stay-at-home parent.
I see clients using this advice, and then dropping the insurance as their youngest was heading to college — and that’s smart.
Using Home-Based Deductions Rightly
If the stay-at-home parent or both parents operate a home-based business, both should be listed on IRS Schedule C and all related business documents when they file taxes.
I’ve reviewed past returns (which we do for free, for non-clients — our clients, of course, already being well taken care of!) where only the information of the spouse who actually filed the taxes was submitted, in effect denying the other spouse from accumulating Social Security benefits.
Lastly, a word about what’s most important: YOU. Stay-at-home parents should make sure they are well on their way to funding their own retirement before paying for a child’s college education. The best thing you can do for your kids is to take care of yourself first. If your children have to take out student loans, despite all the bad publicity, they do have 40 years to pay those loans back — and at favorable interest rates, at that.