January marks the official beginning of the 2024 tax filing season. Informational tax returns will start pouring in, so too will the bad players trying to take advantage of the unwary taxpayer. So be on the alert for possible tax identity theft. Now is the time these bad players are most active.

This month’s focus is on the new year. Traditionally a time for new year’s resolutions, each article chosen is a different angle on approaching the new year. Whether it is getting prepared for the upcoming filing season, or a new year review of your retirement savings plan, now is a great time for review and goal setting.

There is even an article on suggestions to help prepare the financial future of young loved ones and a list of areas that could use an annual check up. Enjoy!

Creating a Financial Savvy Family

As part of our new year issue, why not include some ideas to help those around us set themselves up for a great financial future.

This article focuses on ideas to help create financial savvy children and grandchildren. It’s never too late to impart your wisdom.

Here are some age-relevant suggestions to help develop a solid financial IQ:

• Preschool – Start by using dollar bills and coins to teach what the value of each is worth. Even if you don’t get into the exact values, explain that a quarter is worth more than a dime and a dollar is worth more than a quarter. From there, explain that buying things at the store comes down to a choice based on how much money you have (you can’t buy every toy you see!). Also, get a piggy bank to start saving coins and small bills.
• Grade school – Consider starting an allowance and developing a simple spending plan. Teach them how to read price tags and do comparison shopping. Open a savings account to replace the piggy bank and teach them about interest and the importance of regular saving. Have them participate in family financial discussions about major purchases, vacations and other simple money decisions.
• Middle school – It is time to connect work with earning money. Start with activities such as babysitting, mowing lawns or walking dogs. Open a checking account and transition the simple spending plan into a budget to save funds for larger purchases. If you have not already done so, now is a good time to introduce the importance of donating money to a charitable organization or church.
• High school – Introduce the concept of net worth. Help them build their own by identifying their assets and their current and potential liabilities. Work with them to get a part-time job to start building work experience, or to continue growing a business by marketing for more clients. Add additional expense responsibility by transferring direct accountability for things like gas, lunches and the cost of going out with friends. Introduce investing by explaining stocks, mutual funds, CDs and IRAs. Talk about financial mistakes and how to deal with them when they happen by using some of your real-life examples. If college is the goal after high school, include them in the financial planning decisions. Tie each of these discussions into how it impacts their net worth.
• College – Massive debt often occurs during this period. So focus leaning on borrowing money and all its future implications. Explain how credit cards can be a good companion to a budget, but warn about the dangers of mismanagement and not paying the bill in full each month. Discuss the importance of their credit score and how it affects future plans like renting or buying a house. Talk about retirement savings and the importance of building their retirement account.

Knowing about money — how to earn it, use it, invest it and share it — is a valuable life skill. Simply talking with your children about its importance is often not enough. Find simple, age-specific ways to build their financial IQ. A financially savvy child will hopefully lead to a financially wise adult.

Creating a New Year Financial Review

Some great ideas to consider

Now’s the perfect time to review your financial health and set yourself up for success in 2025. The following checklist can help you organize your goals, identify areas for improvement, and make informed decisions about your money.

• Calculate your net worth. Add up all your assets (savings, investments, property and other valuables). Then subtract your liabilities (what you owe others) from these assets to calculate your net worth. Then compare this figure to last year’s net worth. This measurement can provide valuable insights into your financial progress. If your net worth has decreased, identify the contributing factors and create a plan to address them.
• SMART your goals. Establish your financial goals and then define them using the SMART process: specific, measurable, achievable, relevant, and time-bound. Whether your goal is saving for a home, planning a vacation, or paying off debt, break your goals into actionable steps with clear deadlines.
• Identify hidden spending traps. Review your spending habits. Compare your total income with your expenses to identify areas where you overspent. Look for patterns and consider categories where you can reduce costs in 2025. For example, small adjustments like dining out less frequently or finding more affordable subscription options can add up over time.
• Build up or top off your emergency fund. An adequately funded emergency account is crucial for your financial health. Assess your current emergency fund balance, aiming to save three to six months worth of expenses.
• Give your insurance policies a check-up. Review your existing policies, including health, life, home, auto, and disability insurance. Consider whether your coverage meets your current needs and then adjust limits or add coverage for any new circumstances. Common examples include starting a family or purchasing a home.
• Set up quarterly money check-ins. Schedule regular financial reviews throughout the year to evaluate your progress toward your goals and to address unexpected hurdles you encounter. These check-ins provide an opportunity to adjust your budget, update your goals, and celebrate milestones, such as paying off a credit card or reaching a savings target.
• Invest in your education. Invest in your financial knowledge. Read books, attend workshops, or follow reputable financial experts to stay informed about money management best practices. Knowledge is a powerful tool for achieving financial independence.
• Look for tax-saving opportunities. There are a number of ways to lower your taxable income and qualify for tax deductions and tax credits for any and all taxpayers!

By taking these steps, you’ll be well on your way to making 2025 a year of financial success. Remember, small, consistent actions can lead to significant progress over time.

Happy Female Store Owner Turning Open Sign in Window.

Small Business: Keep Your Customers Coming Back

Happy, satisfied customers are essential to the health of every business. Increasing competition, online review opportunities, and unlimited access to information up the ante on the importance of quality customer service. Here are some tips to help your business thrive by meeting and exceeding your customers’ expectations:

• Understand your customers and their needs. As best you can, put yourself in your customers’ shoes and hone in on the need they are trying to meet with your product or service. Understanding their core need will help you with delivery timelines and provide a clear picture of what it will take to ensure they are satisfied enough to come back.
• Set clear goals and expectations. Once you understand their needs, be clear and transparent regarding the process to deliver your product or service. Set realistic goals and discuss potential delays and pitfalls. Your customers will appreciate the honesty and may even be more understanding if things don’t go according to plan.
• Communicate, communicate, communicate. Keeping your customers from feeling in the dark is imperative to their satisfaction. Be proactive in your communication. The more forms of communication, the better — phone calls, text messages, emails and social media messages. Even if everything is going according to schedule, regular progress messages will help them feel at ease.
• Go the extra mile. Put in the extra effort to go above and beyond what your customers are expecting. At the end of the day, you want your customers to feel like they get what they pay for, and more. If a problem arises with a product or service, show them you care by prioritizing and resolving the situation. If it makes financial sense, consider adding something of value to leave a positive impression.
• Add an authentic, personal touch. In a world full of social media bots, augmented reality and alternative facts, authenticity goes a long way. Showing your customer you care builds trust and loyalty that leads to repeat business and referrals. Birthday greetings, holiday cards and customer appreciation events can show your customers they mean more to you than just revenue.

When times are busy, it can be easy to focus on the work and not the customers. Hold on to these tips as a reminder to keep your customers’ needs a top priority.

As always, should you have any questions or concerns regarding your tax situation please feel free to call.

Upcoming Dates

January 15

• 4th quarter installment of 2024 estimated income tax is due for individuals

January 20

• Martin Luther King Day

Begin tax filing for 2024

• Organize tax documents (W-2s, 1099s, 1098s and other records)
• Schedule tax appointment for document drop off or meeting

Begin tax planning for 2025

• Create a budget
• Adjust your withholdings
• Rebalance investment portfolios

It’s Tax Preparation Time!

Tips to Organize your Tax Records

January officially launches the tax season. As those tax forms start coming in, here are some tips to help you stay organized to make filing your tax return efficient and with the least amount of potential stress:

• Gather your tax documents. Create a list of expected tax forms and then mark them off as as they are received. This includes W-2s, 1099s, K-1s, and other statements from your employer, business, brokers, banks, or other sources. If you notice any errors, promptly contact the issuer to request corrected copies.
• Stay organized. As you gather your documents, designate a specific spot to keep everything together. Consider scanning the documents to store them digitally on your computer, or take photos with your phone as a backup. Missing paperwork is one of the most common reasons for delays in filing tax returns.
• Mark important deadlines. Make and keep your tax filing appointment in mind. While April 15 is the normal filing deadline, your deadline could vary depending on business returns and your tax appointment. But also keep April 15th in mind—it’s the deadline for filing your 2024 individual income tax return. It is also the due date for submitting gift tax returns, contributing to a Roth or traditional IRA for 2024, and paying the first installment of 2025 individual estimated taxes. Set reminders in your calendar to stay on track.
• Know business tax deadlines. If you’re involved in a partnership or an S corporation, remember that business tax returns are due by March 17th. For calendar-year C corporations, the deadline is April 15th.
• Review your mileage logs. If you’re claiming mileage for business, moving, medical, or charitable purposes, ensure your logs are complete, accurate, and up to date. Review and total them to avoid discrepancies.
• Check your child’s tax requirements. Your child might need to file a 2024 income tax return. Typically, a return is required if their earned income exceeds $14,600 or if their investment income (e.g., dividends, interest, or capital gains) is more than $1,300.
• Maximize IRA and HSA contributions. You can still make contributions for 2024 to your IRA or HSA until April 15th or the date you file your return, whichever is earlier. The 2024 IRA contribution limit is $7,000 (or $8,000 if you’re age 50 or older). For HSAs, the maximum is $4,150 for single taxpayers and $8,300 for families.
• Plan for an extension if needed. If you anticipate needing an extension, you must calculate your estimated 2024 tax liability. Even with an extension, you’ll need to pay any taxes owed by April 15th to avoid penalties and interest.

By following these steps, you can simplify the tax filing process and avoid unnecessary stress as deadlines approach.

Plan Your Retirement Goals for 2025

Consistent with our new year’s theme of starting the new year out on a great financial footing, one cannot overlook planning for your retirement future.

Now is a good time to review your alternatives and plan to take full advantage of programs available to you and your family. Here are some ideas.

• Maximize your employer retirement benefit. The first place to start is to look to see what your employer offers in the way of retirement benefits and ensure you are taking full advantage of those benefits. So if your employer offers matching contributions, now is a great time to double check that you’re contributing enough to your 401(k) to take full advantage of this benefit. Matching contributions are essentially free money that can significantly boost your retirement savings over time.
• Leverage new catch-up contribution limits. One of the most significant updates for 2025 is the increased catch-up contributions for certain retirement accounts. For 401(k), 403(b), and SIMPLE IRA plans, individuals age 50 and older can contribute additional amounts beyond the standard annual limit. There’s also now a supersized catch-up contribution limit if you’re age 60 to 63.
• Re-evaluate your investment portfolio. Consider reviewing your portfolio regularly or consulting with a financial advisor to ensure it aligns with your retirement timeline and risk tolerance.
• Explore Health Savings Accounts (HSA). If you’re enrolled in a high-deductible health plan, an HSA can be a valuable tool for retirement planning. Contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are also tax-free. After age 65, you can use HSA funds for non-medical expenses, though these withdrawals will also be taxed like regular income.
• Consider opening an IRA. Many employees maintain employer-provided plans without realizing they could also establish a traditional or Roth IRA. Use this time to review your situation and see if these additional accounts might benefit you or someone else in your family.
• Automate your savings. Consistency is key when it comes to retirement savings. Consider setting up automatic contributions to your retirement accounts to ensure you’re consistently saving.

The best way to take advantage of increases in annual contribution limits is to start early in the year. Remember many tax beneficial retirement plans have annual limits. If you do not max out your annual opportunity, that year’s unused limit is gone forever.

There’s still time to uncover ways to cut your 2024 tax bill before the end of the year. In this month’s newsletter, use our year-end tax savings checklist to help you minimize your annual tax liability.

Also learn about tax policy changes that may be on the horizon in 2025, and read about how the art of selfless giving can help you capture the spirit of the holidays. And test your knowledge of how the holidays are celebrated around the world with our annual holiday quiz!

Please pass this information on to anyone that may find it useful and call if you have any questions or concerns.

Upcoming Dates

Dec. 25 to Jan. 2

• Hanukkah

December 25

• Christmas Day

December 26

• Kwanzaa begins

January 15

• 4th Quarter Estimated Payments Due

Take final year-end actions

• Charitable contributions, other itemized deductions
• Capital gains/losses
• 401(k) contributions
• Dividend income

The 2025 Tax Law Uncertainty

With the changes happening in Washington D.C., there is now some uncertainty about what tax policies we may see in 2025 and beyond. During this time of uncertainty, it is challenging to create a workable tax plan. But not to fear. There are several things that we DO know about tax changes to start 2025. Here are the key highlights as they are currently known.

What we DO know

• Tax brackets and rates. The seven tax rates remain unchanged while the income subject to each rate got a slight bump. After a 5.4 percent increase in 2024, there’s an additional 2.8 percent increase in income subject to each tax rate in 2025. This means more of your income will be subject to a lower tax rate.
• Higher retirement plan limits. The amount you can contribute to a 401(k) in 2025 is $23,500, up from $23,000 in 2024. The 401(k) catch-up contribution limit in 2025 stays at $7,500 if you’re age 50 to 59, and age 64+. New in 2025, if you are ages 60 to 63, the catch-up contribution limit increases to $11,250. The annual contribution threshold for IRAs remains at $7,000, as does the IRA catch-up contribution limit of $1,000.
• New cryptocurrency reporting rules.New reporting rules in effect as of January 1, 2025 means you’ll need to be more vigilant with tracking your cryptocurrency transactions and complying with the IRS’s digital asset rules. Brokers of digital assets, including cryptocurrency exchanges, custodial services, and certain payment processors, must report sales and exchanges of digital assets to the IRS starting in 2025. Your digital asset transactions will be summarized annually on a new Form 1099-DA. This new reporting of digital asset transactions will be similar to existing reporting for traditional securities such as stocks and bonds.

Changes on the horizon

• The 1099-K reporting threshold. If you use third party payment processors like Venmo or sell tickets on apps like SeatGeek, you’re more likely to receive a tax form of your activity that will also be sent to the IRS. The limit requiring your activity to be reported was $5,000 in 2024. In 2025, this threshold is scheduled to be lowered to $2,500, and further lowered in 2026 to $600.
• Uncertainty over TCJA provisions.There has been discussion about extending and/or making permanent many of the provisions contained in the Tax Cuts and Jobs Act (TCJA) of 2017. Most of the provisions are scheduled to expire at the end of 2025, so we will pay attention to any legislation forthcoming that could change any of this tax landscape.
• Proposed decrease in corporate tax rates. There is also discussion about lowering the corporate tax rate from its current level of 21%, in addition to lowering the effective corporate tax rate from 21% to 15% for domestic manufacturers.

Stay tuned for continuing updates of any tax changes as events unfold in 2025.

Year-End Tax Savings Checklist

Great tax moves you can still make

Conducting a year-end tax review of your financial situation can uncover opportunities to cut your tax bill or save you from an unpleasant tax surprise. But hurry, the clock is ticking! Here are several areas to consider reviewing in the next few weeks to trim your tax bill.

• Review #1: Retirement Savings Accounts. The deadline to contribute to a 401(k) plan to help reduce your 2024 taxable income is December 31st. So if your employer’s plan allows it, consider making a last-minute lump sum contribution. For 2024, you can contribute up to $23,000 to a 401(k), plus another $7,500 if you’re age 50 or older. Even better, you have until April 15, 2025, to contribute up to $7,000 into a traditional IRA, plus another $1,000 if you’re age 50 or older. And as long as your income does not exceed phaseout limits, your traditional IRA contribution can reduce your taxable income on your 2024 tax return.
• Review #2: Investments. If you own stock outside a tax-deferred retirement plan, you can sell your under-performing stocks by December 31st and use these losses to reduce any taxable capital gains. If your net capital losses exceed your gains, you can net up to $3,000 against other income such as wages. Losses over $3,000 can be used in future years.
• Review #3: Appreciated Assets.Consider selling appreciated assets in the tax year that helps you the most. While this strategy may be hard to accomplish this late in the year, it’s still worthy of consideration. To do this, estimate your current year’s taxable income and compare it to next year’s projected taxable income. Then sell the appreciated asset in the year that will yield the lowest tax. Remember, if appropriate, to account for the 3.8% net investment income tax in your estimates.
• Review #4: Tax-Efficient Contributions. As you’re reviewing your appreciated assets, consider donating one or more of these assets if it helps you pass the itemized deduction threshold. If it does, consider donating next year’s contributions as well to maximize the tax savings. Remember when you donate a long-term asset (held for more than one year) you avoid paying capital gains taxes while getting a market value charitable deduction. And don’t forget, if you are over age 70 1/2 you can make up to $100,000 in direct contributions from a qualified IRA account and not pay tax on the withdrawal.
• Review #5: Health Spending Accounts. If you participate in a Health Savings Account (HSA), try to maximize your annual contribution to reduce your taxable income. Remember, these funds allow you to pay for qualified health expenses with pre-tax dollars. The deadline for contributing to your HSA and still getting a deduction for the 2024 tax year is April 15, 2025. The maximum contribution for 2024 is $4,150 if single and $8,300 for married couples. If you’re age 55 or older, you can add $1,000 to your HSA contribution. If you have a Flexible Savings Account, you can carry forward a maximum balance of $640 from 2024 into 2025 if your plan allows this.

The Art of Selfless Giving

Capture the spirit of the holidays

We are a generation past the hardships of the dust bowl and the Great Depression. And we are a generation well into an economy based upon consumption. And in this environment, Santa presents an interesting paradox.

From kids’ perspectives, it is about magic and the joy of receiving the unexpected. From Santa’s perspective, it is all about selfless giving. In light of the vast increases in the cost for just about everything, this could be the year you decide to view the holidays from the perspective of Santa.

Here are some ideas to help capture the spirit of giving:

• Give the gift of time. Spend an afternoon with someone you never seem to have the time to see. It could be a neighbor, a parent, an adult child, a grandparent, or a friend. Challenge your kids to give you a non-monetary gift, like a coupon book of chores.
• Make something. Make something instead of buying it. Perhaps it’s a meal, a drawing, or a useful object around the house. There are numerous ideas online and you DO NOT have to be a creative genius, just a willingness to be creative.
• Give the gift of fulfilling an unwanted chore. Offer babysitting for a night out to a young couple. Do the dishes, shovel the walk, or offer to mow the lawn. There are so many unwanted chores, that a creative gift here will be much appreciated.
• Commit to a gift that goes unnoticed.During the holiday season, quietly go about making things better for someone else without them knowing about it. Shoveling a neighbor’s sidewalk, rolling down a trash bin to the curb, gathering a morning paper and placing it by the front door, or picking up the garbage every day in front of a store are all examples that are easy to do.
• Pay it forward. Find opportunities to help someone else with a little surprise gift. Have your kids BRING a gift to help Santa while they visit him. Pay for your meal at a drive through restaurant, and then pay the meal of the car behind you. Do the same thing at a restaurant when you see someone out for a special occasion.
• Provide a smile to someone who needs it. Try to make a person smile every day during the holiday season. Then challenge yourself to do this with a person you do not know, or barely know.

Giving during the holiday season doesn’t need to break the bank. It’s up to all of us to reconnect the season to something that could be a lot more meaningful. Enjoy your holiday season!

Taxes: Understanding the Essentials

The holiday season is celebrated in so many unique ways across the globe. From unusual foods to peculiar customs, each country has its own special way of celebrating. Think you know your global holiday traditions? Test your knowledge and have fun with our annual holiday quiz!

1.) In Japan, what unusual meal is a popular Christmas tradition?

A) Sushi
B) Fried Chicken
C) Tempura
D) Ramen

Answer: B) Fried Chicken

In Japan, eating KFC on Christmas has become a beloved holiday tradition. This started in the 1970s after a successful marketing campaign by KFC, and now people even reserve their meals weeks in advance!

2.) In Norway, what household item do people hide on Christmas Eve to keep it safe from mischievous spirits?

A) Shoes
B) Brooms
C) Mirrors
D) Keys

Answer: B) Brooms

In Norway, people hide their brooms on Christmas Eve to prevent witches and other spirits from stealing them for a night of mischief.

3.) In which country do people celebrate Christmas with a giant lantern festival called Ligligan Parul?

A) Philippines
B) Thailand
C) India
D) Malaysia

Answer: A) Philippines

In the Philippines, Ligligan Parul, or the Giant Lantern Festival, takes place every December and features enormous, colorful lanterns in a dazzling display of light and creativity.

4.) In Ukraine, it’s customary to decorate Christmas trees with what unusual item?

A) Straw
B) Spiderwebs
C) Feathers
D) Seashells

Answer: B) Spiderwebs

Ukrainians decorate Christmas trees with artificial spiderwebs for good luck, based on a legend where spiders wove webs around a poor family’s tree, turning them into silver and gold.

5.) In Venezuela, many people travel to Christmas Mass in which unusual way?

A) On bicycles
B) By horse-drawn carriages
C) Roller-skating
D) On scooters

Answer: C) Roller-skating

Across Venezuela, particularly the capital city of Caracas, it’s a Christmas tradition to attend early morning Mass by roller-skating through the streets, which are even closed to traffic for the event!

6.) In Finland, what do families traditionally do to honor the memory of their loved ones on Christmas Eve?

A) Set a place at the table
B) Visit cemeteries and light candles
C) Sing carols at home
D) Write letters to ancestors

Answer: B) Visit cemeteries and light candles

On Christmas Eve, Finnish families visit cemeteries to light candles on the graves of their loved ones, creating a serene and glowing display of remembrance.

7.) In which country do children place their shoes by the fireplace instead of hanging stockings for Christmas?

A) France
B) Portugal
C) Brazil
D) Austria

Answer: A) France

In France, children leave their shoes by the fireplace, and Père Noël (Father Christmas) fills them with gifts and treats on Christmas Eve.

8.) In Iceland, which mythical creatures visit children during the 13 days leading up to Christmas?

A) Santa’s Reindeer
B) Christmas Cats
C) Yule Lads
D) Snow Fairies

Answer: C) Yule Lads

Icelandic children are visited by the Yule Lads, 13 mischievous creatures who bring small gifts (or potatoes for the naughty ones!) on each of the 13 nights before Christmas.

9.) In Spain, what is traditionally eaten at midnight on New Year’s Eve for good luck?

A) 12 grapes
B) A slice of cake
C) Lentils
D) A piece of garlic

Answer: A) 12 grapes

In Spain, people eat 12 grapes at the stroke of midnight on New Year’s Eve — one for each chime of the clock — to bring good luck for each month of the coming year.

However you celebrate the holiday season, may it be filled with joy and laughter!

Creative Ways to Save Money

Saving money doesn’t have to be a chore. In fact, with a little creativity, it can be both fun and rewarding. Here are some interesting ways to boost your savings without feeling like you’re missing out.

• Embrace the 30-Day Rule. If you find yourself wanting to make an impulse purchase, give yourself 30 days to think it over. This rule allows time for the initial excitement to wear off, helping you decide if you truly need or want the item. If you still want it after 30 days, then go for it! If not, you’ve saved yourself from a purchase you may later regret.
• Try a No-Spend Challenge. Challenge yourself to a no-spend day, week, or even a month. This means avoiding unnecessary purchases and focusing only on essentials, such as groceries, rent, and utilities. Not only does it help you save, but it also makes you more aware of your spending patterns and helps reset your budget habits.
• Have a use-it-up month. Designate a month to use up everything you already have before buying more. This can apply to pantry items, food in the freezer, cleaning supplies, and even beauty products. You’ll be amazed at how much you can save by simply using what you already own instead of restocking.
• Create a Fun Jar. Use a clear jar as a visual savings tool. For example, set a goal to fill the jar with loose change or a specific dollar bill, like $5 or $10. This works especially well if you want to save for something fun, like a weekend getaway or a special purchase. Watching the jar fill up can be surprisingly motivating.
• Make gifts instead of buying them.Homemade gifts are often more thoughtful and can save you a lot of money compared to store-bought options. You could bake cookies, create a photo album, or craft something unique. DIY gifts don’t just save money, they also add a personal touch that recipients appreciate.
• Use a cash envelope system. Using cash instead of debit or credit cards can help control spending. Create envelopes for each budget category (groceries, entertainment, dining out) and place your allotted amount of cash in each. When the cash is gone, you know you’ve hit your limit for that category, which can curb overspending.
• NEVER carry a credit card balance.Speaking of credit cards, carrying a balance from one month to another means wasting money on interest expense. Pay yourself – and not your bank! – by paying your credit card off in full every month.

With a little creativity, you can make saving money both fun and rewarding.

Tax Planning Tips for Your Business

As 2024 winds down, here are some ideas to help you prepare your business for filing your upcoming tax return:

•  Informational returns. Identify all vendors who require a 1099-MISC and a 1099-NEC. Obtain tax identification numbers (TINs) for each of these vendors if you have not already done so.
• Shifting income and expenses. Consider accelerating income, or deferring earnings, based on profit projections.
• Be prepared to receive a Form 1099-K. You may receive a Form 1099-K from each payment processor from whom you’ve received a payment. In addition to credit card companies and banks, payment processors can include Amazon, Etsy, PayPal, Venmo and Apple Pay. You’ll need to include the 1099-K on your tax return.
• Categorize income and expenses.Organize your records by major categories of income, expenses and fixed asset purchases. If your accounting records are accurate, then any tax form should be easy to tie out to your books.
• Separation of expenses. Review business accounts to ensure personal expenses are not present. Reimburse the business for any expenses discovered during this review.
• Create expense reports. Having expense reports with supporting invoices and business credit card statements with corresponding invoices will help substantiate your deductions in the event of an audit.
• Fixed asset planning. Section 179 or bonus depreciation expensing versus traditional depreciation is a great planning tool. If using Section 179, the qualified assets must be placed in service prior to year-end.
• Leveraging business meals. Business meals with clients or customers are 50% deductible. Retain the necessary receipts and documentation that note when the meal took place, who attended and the business purpose on each receipt.
• Charitable opportunities. Consider any last-minute deductible charitable giving including long-term capital gain stocks.
• Cell phone record review. Review your telephone records for qualified business use. While expensing a single landline out of a home office can be difficult to deduct, cell phone use can be documented and deducted for business purposes.
• Inventory review. Review your inventory for proper counts and remove obsolete or worthless products. Keep track of the obsolete and worthless amounts for a potential deduction.
• Review your receivables. Focus on collection activities and review your uncollectible accounts for possible write-offs.
• Review your estimated tax payments.Recap your year-to-date estimated tax payments and compare them to your forecast of full year earnings. Then make your 2024 4th quarter estimated tax payment by January 15, 2025.

As always, should you have any questions or concerns regarding your tax situation please feel free to call.

A number of myths about the IRS and the tax code have been gaining traction online. Believing these misconceptions could unfortunately lead to a bigger tax headache for you. In this month’s newsletter, learn about several tax myths and how you can avoid them.

Also find out how much Social Security benefits are increasing in 2025, how to avoid sneaky add-on fees, and the good and not-so-good of AI.

Please pass this information on to anyone that may find it useful and call if you have any questions or concerns.

Upcoming Dates

Reminder

– Conduct year-end tax and financial planning

Watch Out for These Tax Myths

MYTH: /miTH/ (noun) – a widely held but false belief or idea

Many myths about the IRS and the tax code have been amplified online in recent years.

Here are several myths that if you believe them, could leave you with an expensive tax surprise.

Myth #1: Retirement money is always tax free.

You have retired and withdraw from a 401(k) fully expecting that you won’t owe income taxes. Unfortunately, money withdrawn at any age from a 401(k) – or your traditional IRA – incurs income taxes at your current tax rate.

Lesson Learned: Understand how money in each of your retirement accounts is taxed when withdrawn. Some will have income taxes, some could incur early withdrawal penalties, while some incur no tax at all!

Myth #2: The government won’t find out about a big gambling win.

Gambling winnings are considered taxable income to the feds and most states. The IRS generally wants about a quarter of your winnings from sweepstakes, casinos, bingo, keno, online sports betting, and the like. Casinos and other betting entities also inform the IRS of your winnings over certain thresholds. So it is always best to keep track of your winnings.

Lesson Learned: Gambling winnings fall under tax rules just like other forms of income. Deducting gambling losses is possible, but it has limits that are subject to strict rules. For example, you must itemize deductions on your tax return if you don’t declare yourself a self-employed professional gambler.

Myth #3: Government benefits like unemployment and Social Security aren’t taxable.

Unfortunately, unemployment and Social Security benefits are usually taxable. Unemployment benefits are taxed at your normal tax rate as income at the federal level and in some states. Social Security is taxed, but in a much more confusing way. Supplemental Security Income payments, on the other hand, are not taxable.

Lesson Learned: Plan ahead to mitigate the tax shock. You can have taxes withheld from your unemployment benefits so you don’t have to pay a lump sum when you file your return. With Social Security benefits, understand when and how they can be taxed, since up to 80% of these benefits could be subject to income tax by the federal government.

Myth #4: I work from home and can write off my office expenses.

You can only deduct home office expenses if you operate a business out of your home. If you’re an employee, you’re out of luck. If you do run a business exclusively out of your home, there are still hurdles to clear before you qualify to use the home office deduction.

Lesson Learned: Tax rules can be complicated, even for something that seems as simple as a home office deduction.

If there’s one common theme here, it’s that tax laws can be complex even when they seem simple on the surface. When in doubt ask for help.

Avoid Sneaky Fees Draining Your Bank Account

Inflation isn’t the only reason why your wallet or purse feels lighter these days. Sneaky fees are finding their way into things we buy every day. Here are some common fees you may encounter and what you can do to avoid them altogether.

Common areas with sneaky fees

• Checking account fees. Banks love to nickel and dime you with fees if you don’t maintain a minimum balance or have sufficient direct deposits. It creates a gotcha moment at the end of the month.
• Dealership fees. Buying a vehicle? Dealers are known for tacking on hidden charges like vehicle prep fees. These can easily inflate the sticker price if you’re not paying attention.
• Ticket broker fees. Concert or sports event tickets seem expensive enough, but when ticket brokers add an additional service fee, it’s almost enough to make you stay home. These fees can be up to several hundred dollars!
• Vacation rental fees. Dreaming of a vacation getaway? Convenience fees, cleaning fees, and other add-ons can push the cost of your vacation rental sky-high, turning your relaxing trip into a financial drain.

Smart moves to outsmart sneaky fees

Here’s how you can fight back.

• Understand the fees before you start. For example, when you are considering a rental, get a breakdown of all the fees before you book. The same holds true for buying a car or a plane ticket. The vendors technique of hiding fees to make a service look cheaper does not need to work when you buy.
• Negotiate like a pro. Ask questions or challenge fees you don’t understand. Whether it’s a merchant, a car dealer, or a bank, there’s often room to negotiate. You might be surprised how often they’ll waive the fees just because you ask.
• Switch providers. Many companies charge for services that others offer for free. Tired of your bank’s account fees? Look for one with a truly free checking account—because yes, they do exist.
• Cut out the middleman. Avoid unnecessary fees by dealing directly with providers. For example, if you’re booking a vacation rental, skip platforms like Airbnb that charge a convenience fee and book directly through the owner when possible.
• Say no. Sometimes the best way to save is simply not to buy. If a purchase or service comes with fees that seem outrageous, you can always walk away. By saying no, you send a message to companies that you won’t tolerate being taken advantage of—and you’ll save money in the process.

By knowing how to spot and challenge these fees, you can stop the drain on your wallet and take back control of your finances. After all, it’s not just about cutting costs—it’s about standing up for yourself and your money.

The Good – and Not So Good – of AI

At its heart, technology exists to solve problems and enrich our lives, but its journey is rarely straightforward.

The rapid integration of Artificial Intelligence (AI) into everyday tools—like search engines, smart speakers, and virtual assistants—perfectly illustrates the challenges that come with disruptive innovation.

Here’s a quick look at how AI is improving our lives, but where we also need to take a step back to be more cautious.

The upside of AI: Empowering efficiency

• Has instant access. Unlike humans who are prone to distractions, emotions, or getting tired, AI can operate without any such issues. Since it’s powered by algorithms, human-related points of failure such as stress-induced errors are virtually eliminated.
• Accelerates data processing. AI can quickly sift through vast amounts of data, pinpointing inconsistencies, outliers, and trends in seconds. Tasks that would take a human hours, if not days, are reduced to mere moments, allowing us to focus on higher-level analysis and decision-making.
• Always available for automated tasks. AI automates repetitive tasks, cutting down on administrative busy work and freeing up our time for more complicated tasks. It’s also always available – wherever you have an internet connection.

The downside of AI: Tread carefully

• Plagiarism is likely to occur. AI doesn’t care if the information it creates is owned by someone else. This plagiarism can happen when creating music, text, voiceovers, and other forms of creative expression.
• AI blends truth AND fiction. While AI excels at many things, fact-checking and proper citations aren’t among them. Like Wikipedia, AI can be a useful starting point but shouldn’t be trusted as a sole authority. AI’s outputs may include inaccuracies, making it unreliable for in-depth research or professional use.
• Lacks true creativity. AI may do a great job to organize and repackage information, but it still falls short when it comes to true innovation. Creativity, by nature, is abstract and requires out-of-the-box thinking that AI has yet to master. Its outputs are rooted in existing data, meaning that groundbreaking ideas remain out of reach.
• Reduces critical thinking skills. While technology often makes life easier, it can also make us mentally lazier. Think about how difficult navigating a new city would be without GPS! Similarly, if we become overly reliant on AI for decision-making, our critical thinking skills may weaken over time, leading to a decline in actual human intelligence.
• Can lead to serious legal and tax issues. Relying on AI for legal, tax, or other professional advice can leave you in hot water. While AI may be appropriate for initial research on a particular issue, remember that AI itself isn’t a registered attorney or tax preparer. You should still rely on the knowledge and experience of professionals when advice is needed.

The verdict: Use AI as a tool, not a crutch

• AI has the potential to be a powerful tool to complement our own human ideas and capabilities.
• It’s far from ready, though, to be the sole source of truth.
• Like any emerging technology, it should be approached with both curiosity and caution.

Taxes: Understanding the Essentials

Navigating the tax system can be challenging for everyone, whether you’re an adult who hasn’t paid much attention to paycheck deductions or a young person starting your first job.

A crucial first step in managing taxes is knowing when to seek help, which begins with understanding what can be taxed.

Here are some key points to help you or someone you know better understand the basics of our tax system.

Different types of taxes

When you think about taxes, income tax is often the first to come to mind. Income tax is what you pay on the earnings from your job or from selling products and services.

However, many other types of taxes exist. Here are some of the most common:

• Payroll Taxes. Unlike income taxes, which can fund various government programs, payroll taxes specifically support Social Security and Medicare. This tax amounts to 15.3% of most employees’ paychecks, but half is typically covered by the employer.
• Property Taxes. These taxes are applied to property ownership, such as your home or vacation property.
• Sales Tax. This tax is levied on goods and services you purchase. While state and local governments primarily collect sales taxes, certain items like gasoline are also subject to federal sales taxes.
• Capital Gains Taxes. If you sell an investment or property for a profit, you may owe capital gains taxes. Selling stocks, homes, or rental properties at a profit could trigger these taxes.
• Estate Taxes. These are taxes applied to the assets within your estate after you pass away.
• Inheritance Taxes. As opposed to estate taxes, inheritance taxes are applied when you inherit money or assets after someone else passes away.

Not all income is taxable

While most of your income is taxable, some forms of income are exempt from taxation:

• Interest from municipal bonds is generally tax-free.
• Life insurance benefits often aren’t taxed.
• Capital gains on the sale of your primary residence may be excluded up to a certain limit.
• Estate tax exclusions mean only estates exceeding a set dollar amount are subject to tax.
• Many employee benefits, such as health insurance, Health Savings Account (HSA) contributions, commuter benefits, and small employer-provided gifts, are also tax-free.

The tax rules governing these various types of income can be complex. That’s why it’s often helpful to have a professional guide you through your particular situation.

Having a basic understanding of how taxes work, though, will help you to ask the right questions.

2025 Social Security Changes

2025 Social Security
Find out how your benefits have changed

Average Retirement Benefits

Starting January 2025

Average Benefits – All Workers

• 2025: $1,976/mo (+$69)
• 2024: $1,907/mo

Maximum Benefits for Workers Retiring at Full Retirement Age

• 2025: $4,018/mo (+$196)
• 2024: $3,822/mo

An 2.5% cost of living increase for Social Security retirement benefits and SSI payments begins with December 2024 benefits (payable in January 2025).
Increase your Social Security retirement benefits by 5-8% per year when you delay applying until you’re age 70.

Social Security Revenues & Expenditures

Revenue Sources = $1.35 trillion

• 3.7% – Taxation of benefits
• 5.0% – Interest
• 91.3% – Payroll taxes

Expenditures = $1.39 trillion

• 0.4% – Railroad Retirement financial interchange
• 0.5% – Administrative expenses
• 99.1% – Benefit payments

SOURCE: 2024 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds, Table II.B1.

2025 Social Security & Medicare Tax Rates

• Your employer pays 7.65%
• As an employee, you pay 7.65%
• If you’re self-employed, you pay 15.3%

NOTE: The above tax rates are a combination of 6.2% for Social Security and 1.45% for Medicare. There is also a 0.9% Medicare wages surtax for those with wages above $200,000 single ($250,000 joint filers) that is not reflected in these figures.

• 184+ million people work and pay Social Security taxes
• Social Security has provided financial protection for Americans since 1935

Social Security Payments Explained

• Social Security (SS) retirement benefits are for people who have paid into the Social Security system through taxable income.
• Social Security Disability (SSD or SSDI) benefits are for people who have disabilities but have paid into the Social Security the system through taxable income.
• Supplemental Security Income (SSI) benefits are for adults and children who have disabilities, plus limited income and resources.

Maximum SSI Payments

How does Social Security work?

• When you work, you pay taxes into Social Security.
• The Social Security Administration uses your tax money to pay benefits to people right now.
• Any unused money goes into Social Security trust funds and is borrowed by the government to pay for other programs.
• Later on when you retire, you receive benefits.

How to qualify for retirement benefits

When you work and pay Social Security taxes, you earn credits toward benefits. The number of credits you need to earn retirement benefits depends on when you were born.

• If you were born in 1929 or later, you need 40 credits (10 years of work) to receive retirement benefits
• You receive one credit for each $1,810 of earnings in 2025
• 4 credits maximum per year

Did you know you can check your benefits status before you retire?

• You can check online by creating a my Social Security account on the SSA website. If you don’t have an account, you’ll be mailed a paper Social Security statement 3 months before your 61st birthday.
• It shows your year-by-year earnings, and estimates of retirement, survivors and disability benefits you and your family may be able to receive now and in the future.
• If it doesn’t show earnings from a state or local government employer, contact them. The work may not be covered within Social Security.

Sources: SSA.gov

Remove the Stress from Paying Student Loans

Paying off student loans can be a daunting task. However with a planful approach, making your loans disappear can be a lot more manageable.

Here are some tips to help make paying off your student loans less stressful and hopefully quicker!

• Refinance your loans. You may be able to lower your monthly payment by refinancing your current student loans over a longer period of time. And a lower monthly payment could give you more breathing room in your monthly budget. Refinancing may also provide the opportunity to secure a lower interest rate, which could add up to more savings for you. Refinancing federal student loans with a private lender, though, means losing certain federal protections, such as income-driven repayment plans and loan forgiveness options. Before refinancing, consider your financial situation and evaluate if this is the best option for your circumstances.
  Tip: Shop around to compare rates and terms from different lenders. Even a small reduction in your interest rate can save you potentially thousands over the life of your loan.
• Make extra payments when possible. One of the best ways to pay off your student loans faster is by making extra payments. By paying more than the minimum required each month, you’ll reduce your principal balance quicker, leading to an overall lower interest expense over the life of the loan. Even small additional payments can make a big difference over time. For example, if you receive a bonus at work, a tax refund, or other cash gift, consider putting part or all of it towards your loan.
  Tip: Consider splitting your monthly payment in half and paying that amount every two weeks. Since there are 52 weeks in a year, this approach will result in 26 half- payments, or 13 full payments instead of 12, effectively making one extra payment each year.
• Look into loan forgiveness programs. Depending on your profession and where you work, you may qualify for loan forgiveness programs. The Public Service Loan Forgiveness program, for example, forgives the remaining balance on federal loans for eligible public service workers after 120 qualifying payments. Other programs, like Teacher Loan Forgiveness and Perkins Loan Cancellation, offer similar benefits for teachers and certain professionals.
  Tip: Research eligibility requirements for these forgiveness programs and stay up-to-date with any changes, as some programs require specific steps to remain eligible.
• Take advantage of employer assistance programs. Many employers now offer student loan repayment assistance as part of their benefits package. This benefit can help you make faster progress on your loans without tapping into your personal budget. Check if your employer offers this benefit, and if they do, take advantage of it to reduce your principal balance faster.
  Tip: If your employer doesn’t offer this benefit, ask if it’s something they would consider implementing in the future.

As always, should you have any questions or concerns regarding your tax situation please feel free to call.

Achieving financial security for you and your family is no small task. With inflation and the allure of signing up for yet another monthly service, saving money can feel like an uphill battle. In this month’s newsletter, read about 5 ideas that can help you save money on your road to building wealth.

Also learn about several tips to protect your Social Security number, why you should think twice before tapping retirement accounts to pay for emergencies, and ideas that can help your kids thrive this school year.

Please pass this information on to anyone that may find it useful and call if you have any questions or concerns.

Upcoming Dates

October 15
– Filing deadline for extended 2023 individual and C corporation tax returns

5 Ideas to Help Save Money

Creating a sound financial foundation for you and your family is anything but easy. It is tough to save when everyone is tempting you with adding one monthly service after another. Add to that the high increases in things like property taxes and insurance and you realize that saving is becoming more of an art form than a great habit. So here are some ideas to help build your wealth.

1. Pay yourself first.

Treat saving money with the same care as you pay your bills. Take a percentage of everything you earn and save it. Using this technique can help build an emergency fund and keep you from living paycheck to paycheck.

2. Know and use the Rule of 72.

You can roughly calculate the number of years compound interest will take to double your money using the Rule of 72. Do this by dividing 72 by your rate of return to estimate how long it takes to double your money. For example, 10% interest will double an investment in 7.2 years; investments with an 8% return will double in nine years. Use this concept to understand the power of saving and investment.

3. Use savings versus debt for purchases.

Unpaid debt is like compound interest but in reverse. For instance, using a 20% interest credit card to pay $1,500 for home appliances costs nearly $1,000 in interest expense if paid back over 5 years (on top of the original $1,500!). The result is that you have to work harder and earn more to pay for the items you purchase. A better idea is to save and then buy your dream item. Even better, when you save in a high interest account, you put interest to work for you to make the purchase more affordable.

4. Understand amortization.

When a bank loans you money, it gives you a specific interest rate and a set number of years to pay it back. Each payment you make contains interest as well as a reduction of the amount owed, called principal. Most of the interest payments are front-loaded, while the last few payments are virtually all principal. Making additional principal payments at the beginning of the loan’s term will decrease the amount of interest you pay to the bank and help you pay off the loan more quickly.

5. Taxes are complex and require help.

Tax laws are complicated. They are made even more complex when the rules change, often late in the year. Even worse, the IRS is not in the habit of telling you when you forget to take a deduction. The best way to stay out of the IRS spotlight AND to minimize your taxes is to ask for help.

Think Before Tapping 401(k)s and IRAs as Emergency Fund

All Americans are now allowed to withdraw up to $1,000 every year from retirement accounts to pay for a broad range of emergency expenses. There are several reasons, however, why you should avoid tapping your retirement accounts at all costs.

Reasons to leave retirement funds alone

• You’re diluting your retirement savings. Although the money comes in handy now, you’re chipping away at your nest egg and forfeiting growth. For example, if you withdraw $100,000 that would earn 6% annually tax-deferred for ten years, you give up a whopping $79,000 in lost earnings!
• It may be bad timing. Experts say it’s difficult to time the markets in the current volatile environment. If you sell some holdings right now, you may be locking in losses that would miss future appreciation.
• You still owe income tax. Even if it’s for an emergency, income tax is due on all withdrawals from traditional 401(k)s and IRAs.
• You may also owe a penalty. You may have to pay a 10% penalty on your withdrawal if it doesn’t qualify for an IRS-defined exception.

Ideas to find cash

Instead of tapping into retirement funds, here are some ideas to generate the cash you need:

• Sell unwanted items. Take a look around your home for items that you no longer use such as clothes, electronics, or furniture, and sell them through an online marketplace.
• Rent out a room or other property. If you have extra space in your home, consider renting it out or finding a more long-term tenant. Be sure to check with your local government for rules on short-term rentals.
• Freelance or gig work. Many companies are looking for part-time workers and independent contractors instead of committing to a full-time employee. Consider reaching out to local businesses to offer your expertise, in addition to creating an online profile through platforms that are popular for consultants.

Tips to Protect Your Social Security Number

Very few things in life can create a higher degree of stress than having your Social Security number (SSN) stolen. This is because, unlike other forms of identification, your SSN is virtually permanent. Here are some things that you can do to minimize the risk of having your number fall into the hands of the wrong people.

• Never carry your card. Place your SSN card in a safe place. That place is never your wallet or purse. Only take the card with you when you need it.
• Know who needs it. As identity theft continues to evolve, there are fewer people and organizations who really need to know your SSN. Here is that list:
  • The government. Federal and state governments use this number to keep track of your earnings for retirement benefits and to ensure you pay proper taxes.
  • Your employer. Your SSN is used to keep track of your wages and withholdings. It is also used to prove citizenship and to contribute to your Social Security and Medicare accounts.
  • Certain financial institutions. Your SSN is used by various financial institutions to prove citizenship, open bank accounts, provide loans, establish other forms of credit, track digital payments, report your credit history, or confirm your identity. In no case should you be required to confirm more than the last four digits of your number.
• Challenge all other requests. Many other vendors may ask for your SSN, but having it may not be essential. The most common requests come from health care providers and insurance companies, but requests can also come from subscription services when setting up a new account. When asked on a form for your number, leave it blank. If your supplier really needs it, they will ask you for it. This allows you to challenge their request.
• Destroy and distort documents. Shred any documents that have your number listed. When providing copies of your tax return to anyone, distort or cover your SSN. Remember, your number is printed on the top of each page of Form 1040. If the government requests your SSN on a check payment, only place the last four digits on the check, and replace the first five digits with Xs.
• Keep your scammer alert on high. Never give out any part of the number over the phone or via email. Do not even confirm your SSN to someone who happens to read it back to you on the phone. If this happens to you, file a police report and report the theft to the IRS and Federal Trade Commission.
• Proactively check for use. Periodically check your credit reports for potential use of your SSN. If suspicious activity is found, have the credit agencies place a fraud alert on your account. Remember, everyone is entitled to a free credit report once a year. You can obtain yours on the Annual Credit Report website.

Replacing a stolen SSN is not only hard to do, it can create many problems. Your best defense is to stop the theft before it happen.

Taming Monthly Bill Creep

You notice one of your monthly expenses just went up from $25 to $28. Six months later and you’re now paying $35. Fast forward another 18 months and now the charge is $50 a month. If you have an expense on autopay, you may go several months without noticing that one of your monthly expenses doubles in price.

Here are some tips to help you tame monthly bill creep and avoid a price-hike surprise.

• Investigate your recurring services. Start by taking stock of every service you’re currently using. Review your bank and credit card statements, and highlight all the charges that look like a subscription. Some examples to look for are streaming services (video, music and games), magazines, news subscriptions, digital storage services, gym memberships, and financial services. Determine if you have redundant subscriptions, such as multiple music-streaming services. Finally, ask yourself if each service is still providing value to you. If it’s not, cancel it.
• Review bills for unnecessary fees. Once you trim your list down to the services you want to keep, locate the most recent bill for each. Read through all the charges and make notes of those that are questionable. You might be paying for services you aren’t using, such as a video streaming service on your cell phone bill. Or maybe you’re paying replacement insurance coverage for something you don’t need. For every charge that doesn’t make sense, call and ask the provider to cancel it.
• Bundle expenses when you can. Many suppliers provide multiple services and will offer discounts if you sign up for a few of them. Bundling your cable TV, internet and home phone is a common example of this. Other places to look for bundling opportunities are cell phone providers and insurance companies.
• Negotiate for lower rates. Call each provider and ask for a lower rate or discount. Most companies want to keep your business, so they will often work with you. Service providers routinely change the way they package their products, so saving money might be as simple as changing to a different level of service. It’s rare for companies to reach out and offer savings, so you need to make the call!

It’s easy for your bills to spiral out of control if you don’t keep close tabs on them. Go through a review exercise every few months to ensure you aren’t paying more than necessary.

Proper Inventory Management Can Lead to Higher Cash Flow

Mastering inventory levels is a key to many successful and growing businesses. Here are several reasons why proper inventory management can lead to lower costs and higher cash flow:

As always, should you have any questions or concerns regarding your tax situation please feel free to call.

Reducing the amount of interest you pay over the life of a mortgage can yield huge savings! This month’s newsletter provides an illustration of just how much you can save, even with as little as $10 a month.

Also in this edition, find out how cancelled debt may leave you holding a bigger tax bill, why banks won’t always come to the rescue if you get scammed, and how to protect your valuables before thieves decide to pay your home or apartment a visit.

As always, feel free to pass this information on to anyone that may find it useful and please call if you have any questions or concerns.

Upcoming Dates

September 16
-Filing deadline for 2023 calendar-year S corporation and partnership tax returns on extension
– 3rd quarter installment of 2024 estimated income tax is due for individuals, calendar-year corporations and calendar-year trusts & estates

October 15
– Filing deadline for extended 2023 individual and C corporation tax returns

Banks Won’t  Always Save You from Scams

It’s easy to feel secure about the money you deposit with a bank you’ve come to trust. After all, most banks and credit unions offer certain levels of protection against fraudulent transactions.
Banks, however, won’t protect you against all types of fraud.
Here’s a look at the protections that banks and credit unions usually provide to their customers – and which situations where you’ll likely be on your own.

When a Bank Usually Protects You

For credit cards, banks usually provide zero liability on any unauthorized charges. Debit cards also provide protection against fraudulent purchases, but there may be limitations depending on which financial institution issued your card. According to federal law, here is the maximum amount of fraudulent transactions you’ll be responsible for depending on when you notify your bank that your card is lost or stolen:

• Immediately notify your bank before any unauthorized charges are made: Zero liability
• Within two business days: Up to $50
• After two business days but within 60 days: Up to $500
• Fail to notify within 60 days: Unlimited

When a Bank Usually WON’T Protect You

Unfortunately, there are many types of scams that banks won’t reimburse you for if someone steals your money. Here are some of the more common scams:

• You are scammed into moving money out of your account and into another person’s account.
• A hacker uses lies to convince you to make a bank transfer into a cryptocurrency wallet.
• You liquidate your retirement funds and send the money to someone else for any reason, even if you were conned into it.
• You make a person-to-person transfer to another individual using an online payment app, and that transfer doesn’t come with any type of purchase protection.

How to Protect Yourself from Common Banking Scams

Here’s how to protect yourself from getting scammed:

• Don’t communicate about your accounts unless you initiate the conversation. If someone calls about your bank account, hang up and call the financial institution directly using your normal means of contact.
• Never share your information. Don’t share account details or personal information online or over the phone, especially if you were asked to share these details in a phone call you didn’t initiate or via email.
• Tell someone. Scammers try to isolate you from family members and friends. If you’re unsure about a banking transaction you plan to make, or you wonder if you’re being victimized, tell someone you trust about the situation.
• Ask your bank for help. Bank tellers are trained to spot the early signs of fraudulent transactions. If you’re making a bank transfer and feel unsure about the situation, explain it to a teller or bank representative and ask for their help.
• Report the incident. Whether you unfortunately got scammed or you spotted the attempted scam before withdrawing any money, submit a report of the situation by visiting ReportFraud.ftc.gov.

Early Mortgage Payoff: Small Payments Can Save You Big Money

Small payments can save you big money when paying off your mortgage.
With 30-year fixed rates reaching levels not seen in 25 years, adding even just a little extra to your monthly payment can significantly cut down on the interest you pay over the life of your mortgage.

Here are several different scenarios to illustrate how much interest you can save by slightly increasing each monthly payment.

Base scenario and assumptions

Here’s the assumptions used for this base scenario:

• Average U.S. home price ($420,800) and mortgage rate (7.50%) for early 3rd quarter of 2024
• Average U.S. downpayment of 10%
• House financed using a 30-year fixed rate mortgage
• Monthly payment includes principal and interest payments only; it does not include other expenses typically bundled with monthly payments, such as property taxes, homeowners insurance, and mortgage insurance premiums

With no additional money tacked on to your monthly payment, you would pay $574,583 in interest over the course of your 30 year mortgage in this base scenario. To buy this house for $420,800, you would end up paying just shy of $1 million after adding $574,583 of interest charges! None of us wants to pay $1 million for a $420,000 house. So let’s take a look at the following scenarios to find out how much interest expense you can save by increasing your monthly payments by a small amount.

Here’s a summary of the base scenario’s assumptions compared with how much interest you can save, and how much faster you’ll pay off your mortgage, in each of the following examples.

Example #1: An Extra $100 Per Month

Adding an extra $100 to your monthly mortgage payment would save you $81,902 in interest expense and cut down on the time to pay off your mortgage by 3½ years.

Example #2: An Extra Lump-Sum at Years 5, 15 & 25

In this example, let’s assume you make an additional lump-sum payment of $5,000 in years 5, 15, and 25 of your mortgage. While you wouldn’t save that much extra time paying off your mortgage in this scenario, you’ll still end up pocketing nearly $37,000 just by making three lump-sum payments over the course of your mortgage.

Example #3: An Extra $200 Per Month

If you can afford an extra $100 per month to put towards your mortgage, why not try for $200 a month? This is where the math starts to get fun. Adding $200 a month helps pay off your mortgage 6 years sooner and saves you $140,000 in interest expense.

Every little bit helps

Even adding an extra $10 per month can save you nearly $10,000 over the course of your mortgage. That’s a lot of money that goes into your bank account instead of your bank’s bank account! Paying off your mortgage early and cutting down how much interest you pay over the course of your mortgage doesn’t require a lot of money. Whether it’s $100 or $10 a month, every little bit can help on your quest towards a better financial future for you and your family.

Debt Relief and Taxes

What everyone should know

Negotiating to decrease or zero out a credit card bill or other loan balance can help relieve a tough financial situation, but it can also give way to an unexpected tax bill. Here’s a quick review of various debt cancellation situations and how they impact your your taxes.

• Consumer debt. If you have a credit card balance or loan forgiven, be prepared to receive IRS Form 1099-C representing the amount of debt cancelled. The IRS considers that amount taxable income to you, and they expect to see it reported on your tax return. However, if you’ve filed for bankruptcy or have liabilities that exceed your assets, then you may not need to report a cancelled debt as taxable income.

• Primary home. If your home is short sold or foreclosed and the lender receives less than the total amount of the outstanding loan, expect that amount of debt cancellation to be reported to you and the IRS. But special rules allow you to exclude up to $2 million in cancellation income in many circumstances. You’ll need to fill out paperwork to report this special homeowner exclusion to the IRS, but the end result can be a generous tax break for you and your family.

• Student loans. While this topic has generated plenty of recent headlines, the basics of student loan forgiveness have remained essentially the same. If your school closes while enrolled or soon after you withdraw, you may be eligible to discharge your federal student loan and not include the forgiven amount as taxable income. And if you are able to take advantage of the recent student loan forgiveness provision under the American Rescue Plan Act of 2021, your cancellation may be exempt from federal tax. The challenge, though, is that recent forgiveness programs are still being challenged in court AND your state may still wish to tax the loan forgiveness.

• Second home, rental property, investment property, & business property. The rules for debt cancellation on second homes, rental property, and investment or business property can be extremely complicated. Given your cost of these properties, your financial condition, and the amount of debt cancelled, it’s still possible to have this debt cancellation taxed at a preferred capital gains rate, or even considered not taxable at all.

Each of these themes have one thing in common – the tax laws can be complicated and you will probably need help navigating your situation.

Protect Your Valuables BEFORE Thieves Arrive

If you are concerned about protecting your valuables, here are several suggestions to consider for protecting them from would-be thieves:

• Rent a safe deposit box. It may make sense to keep seldom worn jewelry, coins and other important documents in a traditional safe deposit box at your local bank. But beware if you go this route, as it’s often inconvenient to retrieve your valuables, as well as easy to forget what is in the box and who has the key. Plus it’s important to fully understand your rights under the contract terms.
• Install a home safe. There are several types of in-home safes you can choose from, including wall, floor, free standing, fire and gun safes. There are also diversion safes for small items that are designed to look like everyday household objects that can blend in with its surroundings.
• Secure your house. In addition to installing a state-of-the-art home security system, there are several other ways to physically secure your home. Consider updating your locks every several years, and remember to actually use them! Many burglars are looking for easy targets, and unlocked doors and windows provide easy access. Also consider reinforcing your doors and windows, and installing motion-sensing lights both inside and outside.

Be prepared if a theft does occur

Thieves can still unfortunately steal your valuables despite multiple layers of protection. Here are some suggestions to prepare you if any of your valuables go missing:

• Be familiar with your insurance policy. Read your insurance policy to know what items are covered. Review your policy once a year or whenever you acquire another valuable asset.
• Get an appraisal. It may be difficult to know how much insurance you need without a proper valuation of your assets. Some assets may be worth much more than you think, while other assets may be difficult to pinpoint a value without professional assistance.
• Keep a home inventory. Create a list of all your valuables that includes photographs and purchase receipts. If an asset is stolen, having an up-to-date inventory list and documentation can help quickly jump-start filing an insurance claim.

Tax Credit or Tax Deduction: Understand the Difference

Tax credits are some of the most valuable tools around to help cut your tax bill. But figuring out how to use these credits on your tax return can get complicated very quickly. Here’s what you need to know.

Understanding the difference

To help illustrate the difference between a credit and a deduction, here’s an example of a single taxpayer making $50,000 in 2024.

• Tax Deduction Example: Savi Lesse earns $50,000 and owes $5,000 in taxes. If you add a $1,000 tax deduction, she’ll decrease her $50,000 income to $49,000, and owe about $4,800 in taxes.
  Result: A $1,000 tax deduction decreases Savi’s tax bill by $200, from $5,000 to $4,800.

• Tax Credit Example: Now let’s assume Ima Smart has a $1,000 tax credit instead of a $1,000 tax deduction. Ms. Smart’s tax bill decreases from $5,000 to $4,000, while her $50,000 income stays the same.
  Result: A $1,000 tax credit decreases Ms. Smart’s tax bill from $5,000 to $4,000.

In this example, your tax credit is five times as valuable as a tax deduction.

What you need to know

Credits are generally worth much more than deductions. There are several hurdles you have to clear, though, before being able to take advantage of a credit. To illustrate these hurdles, consider the popular child tax credit.

Hurdle #1: Meet basic qualifications. You can claim a $2,000 tax credit for each qualifying child you have on your 2024 tax return. The good news is that the IRS’s definition of a qualifying child is fairly broad, but there are enough nuances to the definition that Hurdle #1 could get complicated.

Hurdle #2: Meet income qualifications. If you make too much money, you can’t claim the credit.

Hurdle #3: Meet income tax qualifications. To claim the entire $2,000 child tax credit in 2024, you must owe at least $2,000 of income tax.

Take the tax credit…but get help!

The bottom line is that tax credits are usually more valuable than tax deductions. But tax credits also come with many rules that can be confusing. It’s always best to get help.

Make Your Hiring Process a Success!

Whether you’re a sole proprietor ready to hire your first employee, or you already have employees and think you’re ready to hire your next team member, here’s a two-step process to help make your hiring process a success!

Step #1: Define your needs

Long before you start interviewing, think carefully about why you need an employee and how you’re going to work with the new hire. Do you need someone to bring new skills that the business is lacking? Filling a vacated position? Or are you looking for someone to share your workload and free up your time?
If you’re looking for specific skills, perhaps a fractional hire or a consultant can fill your need.
Remember that hiring an employee will also create new challenges to take up your time – payroll, employment regulations, tax reporting, benefits, and so on.

Other questions to consider:

• Will your new employee be part-time or full-time?
• Will he or she work under your direct supervision, or will you delegate responsibility to your new hire?
• Are you prepared for the challenge of giving up hands-on control over part of your business?

Think hard about these issues until you have a very clear idea of what you want from your new employee.

Step #2: Find the right person

Once you’ve defined the role you want your next employee to fill, the second step in your hiring process is to find the right person.
You and your new employee will be working closely together, so good personal chemistry is essential. Think about possible candidates whose work you know, perhaps employees of your suppliers or other businesses you deal with. Interview thoroughly, check references, and above all, trust your intuition.
Hiring employees is always fraught with uncertainty and challenges. But you can increase your chances for success by defining what you need from this employee, then looking for the right person.

As always, should you have any questions or concerns regarding your tax situation please feel free to call.

Scammers are always scheming up new ways to steal your money. At the same time, the altruistic IRS is trying to protect you by staying one step ahead of the fraudsters. In this month’s newsletter, read about the latest scams flagged by the IRS that you should be on the lookout for this summer.

Also in this edition, find out how to avoid the back-to-school shopping trap, tips to increase the worth of your most valuable asset, and a list of buzzwords that can help expand your professional vocabulary.

As always, feel free to pass this information on to anyone that may find it useful and please call if you have any questions or concerns.

Upcoming Dates

September 2
– Labor Day

September 16
– Filing deadline for 2023 calendar-year S corporation and partnership tax returns on extension

– Due date for 3rd quarter installment of 2024 estimated income tax for individuals, calendar-year corporations, and calendar-year trusts & estates

Beware of Scammers Targeting Your Tax Info, Warns IRS

Social media is an easy way for scammers and others to try encouraging people to pursue some really bad ideas, and that includes ways to magically increase your tax refund.

– IRS Commissioner Danny Werfel

Tax scammers continue to become more sophisticated, which means it’s more important than ever to pay attention to any person or message asking you to provide confidential information. Here are several of the more prevalent scams to be on the lookout for, according to the IRS.

• Phishing and smishing. Taxpayers continue to be bombarded with email and text scams from fraudsters attempting to lure you into providing valuable personal and financial information that can lead to identify theft. Phishing involves fraudsters sending emails claiming to come from the IRS, while smishing uses text messaging and alarming language such as Your account has now been put on hold!
  What you can do: Never respond to phishing and smishing messages, and never click on a link! Report all unsolicited emails, including the full email headers, claiming to be from the IRS to phishing@irs.gov.
• Online help to create an IRS account. A scammer may offer to help you set up an online account on www.irs.gov. While the IRS’s online account tool can provide convenient access to your tax information, it’s also a valuable source of information for identity thieves who use information from your account to submit fraudulent tax returns using your name in order to get a big refund.
  What you can do: Schedule an appointment with someone you trust if you need help creating an online IRS account.
• Fake charities asking for donations. Scammers masquerading as charitable organizations try to lure you into making a contribution after natural disasters and other publicized tragedies. Scammers also use fake charities to swipe personal and financial information from you, in addition to targeting certain groups such as senior citizens.
  What you can do: Visit www.irs.gov, then search for Tax-Exempt Organization Search Tool. Use this tool to confirm that a charity to whom you want to donate is a legitimate organization registered with the IRS.
• Fake tax advice and AI tools. Social media routinely circulates inaccurate and misleading tax information. These articles and videos share wildly inaccurate tax advice, including some that involve urging people to misuse common tax documents such as Form W-2 or Form1099. They will make is especially convincing by using AI as a buzz word.
  What you can do: Don’t turn to the internet for tax advice. Remember, AI-generated ideas can also pull in inaccurate information as well!

It’s easy to fall victim to tax scams. So stay vigilant and if you see a scam, let everyone know. It’s with increased awareness that we can decrease the number of scam victims.

5 Little-Known IRA Opportunities You Should Know About

IRAs can be a powerful tool to lower your taxes while helping you save for retirement. Here are 5 little-known opportunities about IRAs that can help you and other family members save even more when contributing your IRAs.

• A nonworking spouse can have an IRA. If your spouse doesn’t work, you may still be able to open and contribute to an IRA for your spouse, assuming that you work and file a joint tax return. This can be a great way to help reduce your taxable income each year.
• Even children can have IRAs. If your child has earned income, you can open and contribute to an IRA. Just make sure you can document the earnings. While your child can contribute their own earnings, many parents will help keep track of things like babysitting money, then match those earnings in either a traditional or Roth IRA. Often the Roth IRA is preferred, because the future earnings could be tax free! Your child’s IRA is managed by an adult until the child is old enough for the account to be transferred into their name.
• You may still contribute to an IRA if you have a 401(k) or similar program at work. As long as you do not exceed the income limits, you can have both an IRA as well as other types of retirement savings plans.
• Non-deductible contributions may be made. If you exceed certain income levels, contributions to your IRA won’t be able to reduce your taxable income for the year. But you may still want to make after-tax contributions to a non-deductible IRA, as the earnings can still grow tax-deferred.
• It’s not just for retirement. With traditional IRAs, if you withdraw funds before the age of 59 1/2 you may be subject to income tax AND an early withdrawal penalty. But there are exceptions to this rule, including withdrawals for a first time home purchase, major medical bills, college costs, birth and adoption expenses, and others. However, it is important to know the rules BEFORE you withdraw the funds.

Tax rules surrounding IRAs are vast and complex. But within the rules are numerous situations that if you know they exist, can help you plan for a more tax-efficient future.

The Busy Business Owner: Get Back 15 Minutes a Day

Meetings, phone calls, emails, text messages, and water cooler conversations with your employees constantly bombard you as a business owner. Freeing up 15 minutes a day could dramatically improve both your workflow and peace of mind.

Here are some ideas for getting back 15 minutes every day:

• Use your phone. Whenever possible, use your phone instead of email. Oftentimes talking with someone directly is more efficient than spending the time to compose an email. Plus, email chains can fill your inbox and require precious minutes to read and decipher. Using the phone can also help avoid potential misunderstandings, as a person’s tone of voice conveys information that may be lost or misinterpreted when shared via a written message.
• Be brief with emails. Many tech entrepreneurs are known for their brief emails that consist of only several words. In situations where you do use email, consider crafting a response that is only several words in length. And remember the golden rule of emails: send fewer emails to receive fewer emails.
• Plan your meetings. Face-to-face time with colleagues, vendors, and customers is often productive and essential for growing a business. On the other hand, meetings can be a huge waste of time if not properly planned. Establish clear goals for a meeting in advance so your team can focus on priorities and get back to work.
• Minimize distractions. Business owners enjoy developing a rapport with their employees. These personal conversations, however, need to have boundaries so that both you and your employees can stay on task. Tell your team if there’s a day you don’t have time for small talk. Consider putting an old-fashioned Do Not Disturb sign on your door when you need to get things done.
• Delegate when possible. If you’re a small business owner who built a company from scratch, you may be reluctant to relinquish control over day-to-day operations. But failure to delegate can sap time from more important tasks like planning, building relationships with key vendors, and growing your customer base. So develop a plan to train your employees to assume more responsibility over time.

Fifteen minutes may not seem like much, but a busy business owner can work wonders with just a little more time every day.

No matter what season of life you find yourself in, the IRS will probably find a way to tax it. In this month’s newsletter, read through several situations where a tax planning session might make sense to help you try and cut your 2024 tax bill.

Also learn how to prepare yourself financially when purchasing a vehicle, several ideas to unplug during this year’s summer season, and why every impression matters in the world of business.

As always, feel free to pass this information on to anyone that may find it useful and call if you have any questions or concerns.

Upcoming Dates

June 15
– Due Date Quarterly Estimated Taxes

Prepare Yourself Financially When Purchasing a Vehicle

Financing a new or used car could spell big financial trouble if your vehicle is ever declared a total loss – even if the accident is 100% the other driver’s fault. Here’s what you need to know about staying safe financially if you take out a car, truck, or SUV loan in the future.

Background – The 80% Rule

Many Americans believe if their vehicle is declared a total loss following an accident, insurance companies will provide enough money to cover the cost to replace the vehicle with a similar vehicle. The truth, though, is that insurance companies never provide you with enough money to buy a true replacement vehicle.

The rule of thumb to use when planning is 80%…if the true cost to get the exact same vehicle you were driving before an accident is $30,000, your insurance will only give you 80% of this dollar amount, or $24,000. You’ll have to come up with the other 20%, or $6,000 in this example.

Why not 100%?

Unbeknownst to most of America, the valuation of vehicles deemed a total loss is determined by one company, CCC Intelligent Solutions. Per CCC, their services are used by most of the top 20 insurance companies. Instead of using a fair market valuation method to calculate the replacement cost of your vehicle, CCC uses a model that calculates a value that, when compared to valuation models found at Kelly Blue Book, Edmunds, and NADA, is systemically low.

How to Protect Yourself Financially

Here are some ideas to help you stay financially healthy when purchasing your next vehicle:

• Put down at least 20%.An unavoidable accident, even with no medical bills, could place your financial life in chaos. So try to have at least 20% equity in the vehicles you own from the moment you make the purchase or your loan will be underwater leaving you with no room to replace your vehicle with a similar make and model.
• Get a vehicle history report.Don’t buy a vehicle that’s been in an accident or has had other major issues such as flood damage. Buying a vehicle history report can help you identify cars, trucks, & SUVs that may create an even greater financial risk if you need to find a replacement.
• Build a fund for vehicle repairs and maintenance.Save up for inevitable maintenance and vehicle repairs. You could even use these funds to cover your 20% portion of a vehicle’s replacement cost. Having enough money in this fund is critical. If you need to repair a car after a fender bender AND you do not have enough to cover your share of the cost, you will need to deal with the lender who has a lien on your vehicle. You can quickly find yourself in a financial trap.
• Choose shorter repayment terms.While the average car loan length is now well over five years for both new and used vehicles, choosing a shorter repayment term can help you build equity faster. You’ll have a higher monthly payment, but you’ll be in a better financial situation sooner in the event of an accident.

You Need Tax Planning If..

Life can alter your taxes with little to no warning. Here are several situations where you may need to schedule a tax planning session:

1. Getting married or divorced.

You could get hit with a Marriage Penalty in certain situations when the total taxes you pay as a married couple is more than what you would pay if you and your partner filed as Single taxpayers. The opposite can also occur, when you benefit from a Marriage Bonus. This often occurs when only one spouse has a job or earns income in other ways such as a business. Another situation when tax planning becomes critical is if you and your future spouse both own homes before getting married.

If you’re going from Married to Single, make the process include tax planning. Alimony is no longer deductible by the spouse making payments, while the spouse receiving the alimony must report the payments as taxable income at the federal level. Child support is also not deductible by the spouse making payments, and isn’t considered taxable income for the spouse receiving payments. In addition, not all assets are taxed the same, so their true value will vary.

2. Growing a family.

Your family’s newest addition(s) also comes with potential tax breaks. You’ll need a Social Security number for your newborn child and to understand the impact this little gem will have on your full-year tax situation. These include breaks to help pay for child care or adoption-related expenses, the child tax credit, and the Earned Income Tax Credit.

3. Changing jobs or getting a raise.

Getting more money at work is a good thing. But it also means a higher tax bill. So you may need to review your tax withholding to ensure there are no surprises at the end of the year. And when leaving an employer, expect a tax hit for severance, accrued vacation, and unemployment income payments.

Another potential tax problem if you get a raise or otherwise earn more money is that you may no longer qualify for certain tax breaks, as most tax deductions and tax credits phase out as your income increases. Consider scheduling a tax planning session to discuss the phase out thresholds that may affect you in 2024.

4. Buying or selling a house.

You can exclude up to $250,000 ($500,000 if married) of capital gains when you sell your home, but only if you meet certain qualifications. A tax planning session can help determine if you meet the qualifications to take advantage of this capital gain tax break, or other home-related tax breaks such as the mortgage interest deduction or credits for installing qualified energy-efficient home improvements.

5. Saving or paying for college.

There are many tax-advantaged ways to save and pay for college, including 529 savings plans, the American Opportunity Tax Credit, and the Lifetime Learning Credit. As you plan your future, understanding how these expenses can be managed often happens long before you begin your college journey.

At the end of the day, when in doubt please reach out. There is no reason to pay more than you need to and a simple tax planning session can make all the difference.

Business Advice: Every Impression Matters

With competition knocking at your door for virtually every product or service, you need to hone every advantage available to you. One of the ways you can set your business apart is to create an awesome customer experience with every interaction. This is less of an event and more a state of mind for your entire team. Here are several steps to help you get there:

• The three outcomes. Start by understanding that every interaction with customers AND vendors has three – and only three – possible outcomes: positive, neutral, or negative. Your goal is to make every interaction, from a label on a product to speaking with someone on a call, a positive experience. Or in a worse case scenario, neutral.
• Make a great first impression. The first impression a potential customer creates about your business can come from many different avenues. Train your customer service reps and create an approachable tone on the phone. If you choose to use social media, keep it fresh or take it down. See your lobby as others see it. All details matter.
• Manage the outcome. The best way to do this is to eliminate the possibility of a negative outcome with your first impression. With customer interaction, this is often accomplished with active listening and a smile.

  For example, let’s say you receive a call from a customer wanting to hear about a new service. The employee that handles the service is not available and you are limited in your knowledge. The worst thing you can say is, I’m sorry, the person responsible for the service is not here at the moment. In the customer’s mind, you immediately remove the possibility of a positive outcome! Instead, engage the customer to hear about their needs, gather as much information as possible, and commit to finding the answers for them and calling them back immediately.

• Create slingshot experiences. No matter how well you strive to offer top-notch customer service, there will always be instances that are less than favorable. Use this as an opportunity to turn a negative experience into a positive one by thrilling the disgruntled customer with your solution. Even if the solution is costly and unreasonable, that customer will tell everyone the story about how you solved their problem.
• Use problems to make permanent improvements. Knowing your strengths can reaffirm your approach and help set customer service performance goals. On the other hand, learning about a bad experience from a customer’s perspective will give you great insight into how you can improve. Use these problems to focus your activity. Over time, the results of this continual improvement can have a tremendous impact on your business.

Creating a culture that excels at customer service is attainable if you put in the effort to know your customer’s needs and to understand that every impression matters!

Surviving Wedding Season Without Breaking the Bank

According to this survey by TheKnot.com, the average wedding in 2023 had a price tag of $35,000. And it’s not just the lucky couple doling out serious money. Wedding guests can also face steep costs between gifts and traveling to and from the big event. If you’re planning on attending a wedding or two (or three or four?) this summer, here are several ideas to help keep your wedding costs under control.

1. Give cash instead of buying a gift off a registry. Most people want to give a wedding gift that, on some level, reflects the relationship they have with the couple. This desire to find that perfect gift can sometimes lead to overspending. Instead of buying a gift off a registry, consider giving cash. Sticking with cash can help you stick to your wedding season budget and avoid your gift being stuck in a box or closet that never gets used.
2. Think outside the box for lodging. If traveling to a wedding, start looking at lodging options as soon as you know the date. First, check to see if you have family or friends in the area you would be comfortable staying with. Next, consider reconnecting with friends that are attending and share a room. Perhaps the wedding couple saved a block of rooms in a local hotel at a special rate. If so, compare the cost of that hotel with nearby hotels and short-term rentals. Remember to figure out your accommodations early so you don’t get stuck with just one expensive option.
3. Share your travel expenses. It’s possible you’ll have some friends or family attending the same wedding as you. If the wedding involves traveling, split some of the costs with them. This can include carpooling, sharing a rental car, teaming up on taxi or ride-share expenses, as well as sharing hotel accommodations.
4. Rent your attire. Going to a bunch of weddings in a short amount time can create a wardrobe challenge. Purchasing a new outfit for each one will get really expensive really quickly. If you take the one-and-done approach with your formal wear, renting a dress or suit will only set you back a fraction of the cost of buying new clothes for every wedding.
5. Respectfully decline. Whether it’s the cost of travel, poor timing, or something else, it’s OK to decline the invitation. The wedding couple expects some people won’t be able to make it to their big event. But it’s important to let them know you won’t be there. When sending back the RSVP, include a kind greeting and the reason for your absence without going into great detail. When the wedding day comes, remember to send a card or a gift.

Wedding season is a time of fun and celebration. Knowing that you also made the best financial decisions possible makes the occasion even better.

As always, should you have any questions or concerns regarding your tax situation please feel free to call.

This publication provides summary information regarding the subject matter at time of publishing. Please call with any questions on how this information may impact your situation. This material may not be published, rewritten or redistributed without permission, except as noted here. This publication includes, or may include, links to third party internet web sites controlled and maintained by others. When accessing these links the user leaves this newsletter. These links are included solely for the convenience of users and their presence does not constitute any endorsement of the Websites linked or referred to nor does COUTO DEFRANCO P.A. have any control over, or responsibility for, the content of any such Websites. All rights reserved.

Summertime offers unique tax and money saving opportunities for the whole family.

In this month’s newsletter, find out how day camps for your kids may be tax deductible, if you know the rules!

Also read about shielding your emergency fund from inflation and why you should always turn to a trusted tax professional if you receive a letter from the IRS.

Upcoming Dates

June 15
– Second quarter 2023 estimated tax payments are due

Shield Your Emergency Fund From Inflation

Most financial experts suggest keeping three to six months worth of household expenses in savings to help in case of emergency. But with record inflation, that task just got a lot harder to accomplish as virtually every safe place to put your emergency funds will not provide interest rates that keep pace with inflation. But that does not mean you cannot increase the rate of return on these funds.

Here are some ideas to reduce the impact of inflation on your emergency funds.

Actively monitor your savings account rate.

An interest rate hike by the Federal Reserve may not instantly change the rate on your current savings account, but it could lead to a higher rate for other accounts offered by your current bank or other banks.

What you need to know: If your bank is slow to raise your savings rate, be willing to monitor and shift funds to a bank that does. Just make sure the funds are still FDIC insured and are kept at a reputable bank.

Take a look at Series I Savings Bonds.

Series I Savings bonds are issued and backed by the U.S. government and feature two interest rate components: a fixed rate and an inflation rate. The fixed rate is set when the bond is issued and never changes during the life of the bond. The inflation rate resets semi-annually based on the Consumer Price Index.

What you need to know: You must hold an I bond for at least 12 months before redeeming it. And although you can redeem it after one year, you’ll have to pay a penalty worth the interest of the previous three months if you redeem the bond within five years. And remember, you must be prepared to pay the penalty if you need the funds for an emergency.

Creative use of Roth IRA funds in an emergency.

Roth IRAs are funded with after-tax dollars. Because of this, early removal of the initial contribution is tax and penalty free. If you dip into the earnings, however, you will not only be subject to income tax, but also may be subject to a 10% early withdrawal penalty.

What you need to know: Use of a Roth IRA is often a creative way to fund your emergency account while achieving higher returns with conservative investment choices, but it is not for the faint of heart. If you get this one wrong, it could cost you in taxes, penalties and lost fund value in a bear market. Prior to removing funds from any IRA, it makes sense to conduct a tax planning session.

Higher rates are out there, you just need to be aware and willing to actively manage your emergency funds to ensure you are attacking the risk of inflation.

Make Your Child’s Summer Break a Tax Break!

As a busy working parent, you may be on the lookout for activities that are available for your kids this summer. There may be a solution that’s also a tax break: Summer camp!

Using the Child and Dependent Care Credit, you can be reimbursed for part of the cost of enrolling your child in a day camp.

Am I eligible?

1. You, and your spouse if you are married, must both be working.
2. Your child must be under age 13, your legal dependent, and live in your residence for more than half the year.

Tip: If your spouse doesn’t work but is either a full-time student, or is disabled and incapable of self-care, you can still qualify for the credit.

How much can I save?

For 2023, you can claim a maximum credit of $1,050 on up to $3,000 in expenses for one child, or $2,100 on up to $6,000 in expenses for two or more children.

What kind of camps?

The only rule is: no overnight camps.

The credit is designed to help working people care for their kids during the work day, so summer camps where kids stay overnight aren’t eligible for this credit.

Other than that, it doesn’t matter what kind of camp: soccer camp, chess camp, summer school or even day care. All of these are eligible expenses for this credit.

Other ways to use this credit

While summer day camp costs are a common way to use this credit, any cost to provide care for your children while you are working may be eligible.

For example, you can use this credit to pay a qualified day care center, a housekeeper or a babysitter to take care of your child while you are working. You can even pay a relative to care for your child and claim the credit for that expense, as long as the relative isn’t your dependent, minor child or spouse.

This is just one of many possible tax breaks related to children and dependents. Please call if you have questions about this credit, or if you’d like to discuss any other tax savings ideas.

Never Take on the IRS Alone!

Sleuthing your way through a tax audit by yourself is not the same as fixing a leaky faucet or changing your oil. Here are reasons you should seek professional help as soon as you receive a letter from the IRS:

IRS auditors do this for a living — you don’t.

Seasoned IRS agents have seen your situation many times and know the rules better than you. Even worse, they are under no obligation to teach you the rules. Just like a defendant needs the help of a lawyer in court, you need someone in your corner that knows your rights and understands the correct tax code to apply in correspondence with the IRS.

Insufficient records will cost you.

When selected for an audit, the IRS will typically make a written request for specific documents they want to see. The list may include receipts, bills, legal documents, loan agreements and other records. If you are missing something from the list, things get dicey. It may be possible to reconstruct some of your records, but you might have to rely on a good explanation to avoid additional taxes plus a possible 20 percent negligence penalty.

Too much information can add audit risk.

While most audits are limited in scope, the IRS agent has the authority to increase that scope based on what they find in their original analysis. That means that if they find a document or hear something you say that sounds suspicious, they can extend the audit to additional areas. Being prepared with the proper support and concise, smart answers to their questions is the best approach to limiting further audit risk.

Missing an audit deadline can lead to trouble.

When you receive the original audit request, it will include a response deadline (typically 30 days). If you miss the deadline, the IRS will change your tax return using their interpretation of findings, not yours. This typically means assessing new taxes, interest and penalties. If you wish your point of view to be heard — get help right away to prepare a plan and manage the IRS deadlines.

Relying on an expert gives you peace of mind.

Tax audits are never fun, but they don’t have to be pull-your-hair-out stressful. Together, we can map out a plan and take it step-by-step to ensure the best possible outcome. You’ll rest easy knowing your audit situation is being handled by someone with the proper expertise that also has your best interests in mind.

Get More Money for School by Understanding These Scholarship Myths

There’s plenty of money available for you to pursue a post-secondary education for either you or your child! Here are several myths that could be getting in the way of securing money to pay for school.

Common misconceptions

Scholarships are only for top scholars and athletes. Many news stories are about high-profile students who snag a fully-paid-for scholarship. There are an unbelievable number of scholarships, however, that do not take grades or athletic ability into consideration.

Scholarships are only for students attending college. Enrollment in vocational and trade schools has nearly doubled since 2000, according to the National Center for Education Statistics. And the good news for prospective students is that scholarships for vocational and trade schools are just as plentiful as scholarships for four-year colleges and universities.

You have to be a great writer. Winning scholarships is more often about what you write than how you write. And for some scholarships, following the application’s directions and answering the questions that are asked is more important than how well you write.

You have to be a high school student. Scholarships aren’t just for soon-to-be high school graduates. Many schools have degree programs – and corresponding scholarships – aimed at older adults who are looking to learn new skills or make a transition in their career. Scholarships are also available for graduate students.

Finding scholarships takes too much time. Yes, you’ll need to invest a certain amount of time to find and apply for scholarships, but finding financial aid may not require as much of a time investment as you may think with tons of available online tools.

What to do

Follow the directions! You’d be surprised how many applicants don’t read or follow the rules of the scholarships. Take the time to read through all instructions, and thoughtfully answer the questions that are asked.
Apply every year by January. For every year that you’re attending a post-secondary school, consider setting aside some time in the fall and early winter to complete scholarship applications for the upcoming school year. Many applications need to be completed by January for the following school year.
Ask your school. Nearly every college in the U.S. offers some form of merit-based financial aid. You’ll likely need to complete the Free Application for Federal Student Aid (FAFSA), as many colleges have all students apply for scholarships by completing the FAFSA. This includes students who may qualify for only merit-based scholarships.
Ask local businesses. Many local businesses, civic groups, foundations, and religious or community organizations offer scholarships. So ask around in your community about available financial aid.

The early bird often gets the worm, but the bird that does not go looking for one will never get one!

It’s tax time! In the next couple of weeks you will be inundated with W-2s and various informational tax forms like 1099s. By paying attention to them, ensuring their accuracy, and that you are getting them all, you will be miles ahead in getting your tax return done. Spend a minute reviewing ways to get your tax information organized. Then consider some alternatives to the traditional new year’s resolution craze.

All this plus new inflation adjustments are providing a retirement contribution opportunity for those who plan, plus ideas on resolving common financial surprises that will take the sting out of most of them.

As always, feel free to reach out with any question or comments.

Upcoming Dates

January 16
– Martin Luther King Jr. Day

January 17
– 4th quarter installment of 2022 estimated income tax is due for individuals, calendar-year corporations and calendar-year trusts & estates

Begin tax filing for 2022
– Organize tax documents (W-2s, 1099s, 1098s and other records)
– Plan for tax time- plan for document drop off or meeting

Begin tax planning for 2023
– Create a budget
– Adjust your withholdings
– Rebalance investment portfolios

It’s Tax Time! Tips to Get Organized

The beginning of a new year brings the need to recap the previous one for Uncle Sam. Here are some tips and a checklist to help get you organized.

Look for your tax forms.

Forms W-2, 1099, and 1098 will start hitting your inbox or mailbox in the next couple of weeks. If you have not already done so, review last year’s records and create a checklist of the forms to make sure you get them all.

Collect your tax documents using this checklist.

Using a tax organizer or last year’s tax return, sort your tax records to match the items on your tax return. Here is a list of the more common tax records:

• Informational tax forms (W-2s, 1099s, 1098s, 1095-A) that disclose wages, interest income, dividends and capital gain/loss activity
• Other forms that disclose possible income (jury duty, unemployment, IRA distributions and similar items)
• Business K-1 forms
• Social Security statements
• Mortgage interest statements
• Tuition paid statements
• Property tax statements
• Mileage log(s) for business, moving, medical and charitable driving
• Medical, dental and vision expenses
• Business expenses
• Records of any asset purchases and sales, including cryptocurrency
• Health insurance records (including Medicare and Medicaid)
• Charitable receipts and documentation
• Bank and investment statements
• Credit card statements
• Records of any out of state purchases that may require use tax
• Records of any estimated tax payments
• Home sales (or refinance) records
• Educational expenses (including student loan interest expense)
• Casualty and theft loss documentation (federally declared disasters only)
• Moving expenses (military only)

If you aren’t sure whether something is important for tax purposes, retain the documentation. It is better to save unnecessary documentation than to later wish you had the document to support your deduction.

Clean up your auto log.

You should have the necessary logs to support your qualified business miles, moving miles, medical miles and charitable miles driven by you. Gather the logs and make a quick review to ensure they are up to date and totaled.

Coordinate your deductions.

If you and someone else share a dependent, confirm you are both on the same page as to who will claim the dependent. This is true for single taxpayers, divorced taxpayers, taxpayers with elderly parents/grandparents, and parents with older children.

With proper organization, your tax filing experience can be timely and uneventful.

Alternative Ideas to New Year’s Resolutions

It’s that time again when everyone has high hopes for how they are going to better themselves during the new year. The traditional way many people set goals, however, doesn’t seem to be working! According to The Economic Times, only 16 percent of people follow through with New Year’s resolutions. Here are seven alternatives to the traditional New Year’s resolutions that could help you in 2023.

Make 3, 5, and 10-year goals.

Part of the problem with resolutions is they are oftentimes open-ended, such as, I want to lose weight. Instead, write down specific goals for 3, 5, and 10 years from now. Break your goals into categories like family, career, financial, and health. Having concrete future goals is a good starting point to creating an obtainable vision.

Create better connections.

Social media makes it easy to stay in touch with what friends and family are doing, but it often lacks true personal connection. As we exit the pandemic era, consider committing to intentional development of relationships with a list of people that are important in your life. Write out the list and put it in a spot you’ll see every day. Then be consistent communicating with them and taking the time to actually reconnect in a meaningful way.

Reflect on the previous year.

Every year brings its share of happiness, challenges and things you never saw coming. Reflecting on these events is a great way to realize how much you’ve changed and grown over the past year. Whether the changes are positive or not so positive, acknowledging and analyzing will help you grow from your experiences and set you up for a better future.

Quit something.

For most of us, the days are overflowing with things to do and too many bills to pay. Why not take an inventory and quit something? Take back some of your income and time, to allow you to pursue something else or spend money on something more important to you.

Pretend like you are moving.

Walk around your house or apartment and make a list of things you’d like to improve or fix, just like you would do before moving. It can be a big thing like building a deck or a small thing like going through an old closet full of that stuff that you thought you might need someday. Donate it and keep the receipt – it might be a tax deduction!

Plan Your Retirement Savings Goals for 2023

A big jump in cost-of-living calculations means a big jump in how much you can contribute to retirement accounts in 2023! Now is the time to plan your retirement contributions to take full advantage of this tax benefit. Here are annual contribution limits for several of the more popular retirement plans:

What you can do

• Look for your retirement savings plan from the table and note the annual savings limit of the plan. If you are 50 years or older, add the catch-up amount to your potential savings total.
• Then make adjustments to your employer-provided retirement savings plan as soon as possible in 2023 to adjust your contribution amount.
• Double check to ensure you are taking full advantage of any employee matching contributions into your account.
• Use this time to review and re-balance your investment choices as appropriate for your situation.
• Set up new accounts for a spouse and/or dependents. Enable them to take advantage of the higher limits, too.
• Consider IRAs. Many employees maintain employer-provided plans without realizing they could also establish a traditional or Roth IRA. Use this time to review your situation and see if these additional accounts might benefit you or someone else in your family.
• Review contributions to other tax-advantaged plans, including flexible spending accounts (FSAs) and health savings accounts (HSAs).

The best way to take advantage of increases in annual contribution limits is to start early in the year. The sooner, the better.

Correcting Common Financial Mistakes

You’re working at the office, getting stuff done around the house, or hanging out with family when — wham! — a phone call, email or text alerts you that something happened with your finances. When a not-so-nice financial event hits, don’t let it take you down. Here are some common miscues and steps to remedy each situation:

An overdrawn bank account.

First, stop using the account to avoid additional overdraft fees. Next, manually balance your account by reviewing all posted transactions. Look for unexpected items and fraudulent activity. Then call your bank to explain the situation and ask that all fees be refunded. Banks are not obligated to refund fees, but sometimes they will. The next steps vary based on the reason for the overdraft, but ultimately your goal is to bring your account back to a positive balance as soon as possible.

A missed credit card payment.

Make a payment as soon as you realize you missed it. If possible, consider paying off the entire outstanding balance because interest will be assessed on old AND current charges. Then call the credit card company to get them to refund the late fee and interest charges. The customer service representative will look at your account, see the payments, and be more willing to do as you request. As long as you aren’t habitually late with payments, you can usually get the fees eliminated or reduced.

A tax return that didn’t get filed.

Gather all your tax documents as soon as possible, and file the tax return even if you can’t pay the taxes owed. This will stop your account from gathering additional penalties. You can then work with the IRS if necessary on a payment plan. The sooner you file, the sooner the money will be in your bank account if you’re due a refund. If you wait too long (three years or more), any potential refunds will be gone forever.

Losing a wallet or a purse.

Start by calling all of your bank, debit and credit card companies. Set up fraud alerts with the major credit reporting companies and get a new driver’s license. Then file a report with the police. Visit identitytheft.gov and review additional steps and procedures to protect yourself.

A missed estimated tax payment.

Estimated payments are due in April, June, September and January each year. If you are required to make estimated payments and miss a due date, don’t simply wait until the next due date. Pay it as soon as possible to avoid further penalties. If you have a legitimate reason for missing the payment, such as a casualty or disaster loss, you might be able to reduce or even eliminate your penalty.

Remember that mistakes happen. When they do, stay calm and walk through correcting the situation as soon as possible.

Tips to Get Your Finances in Tip-Top Shape

Here are some tips to get your finances in tip-top shape for 2023.

Know your net worth.

The first step to improving your finances in 2023 is to create a snapshot of your current financial situation. So note all your assets, then subtract all your liabilities (what you owe others) to calculate your net worth. When done on a regular basis, you will be able to evaluate changes to your financial status and identify steps to reach your financial goals.

Plan for hardships.

If the pandemic has taught us anything, it’s to plan for the unexpected. Now is the time to prepare by building an emergency fund that covers six or more months of expenses.

Prepare for a lower refund.

The 2021 tax year saw increases to the child tax credit and the dependent care credit, resulting in a big jump in tax refunds for many taxpayers. These changes, however, were not extended to 2022. If you plan to take advantage of either of these two credits on your 2022 tax return, be prepared for a possible decrease in your refund.

Create a debt repayment plan.

Design a plan to pay off your existing debts and try to avoid taking on any new debt. Pay special attention to credit card debt, as inflation is vastly increasing the cost of this debt every month! Also consider whether consolidating your debt is a good option for you.

Save for retirement.

Plan for your future self by building your retirement fund. In 2023 you can contribute up to $22,500 in your 401(k), plus another $7,500 if you’re 50 or older. Keep in mind your company may provide matching contributions up to a stated percentage of compensation. And you may be able to supplement this account with contributions to IRAs and/or other qualified plans.

Review and re-balance your portfolio.

Review your investments periodically and reallocate funds to reflect your main objectives, risk tolerance, and other personal preferences. This will put you in a better position to handle the ups and downs of the markets.

Set a date to review your estate.

Review your estate and legal documents at least once a year, in addition to whenever you experience a significant change in your life. Now is a good time to review your will, trust documents, beneficiary designations, powers of attorney, healthcare directives, and other estate- and legal-related documents.

It’s that time of the year again for our Year End Tax Planning Guide. Click below for a PDF version of the guide. The guide contains very important information regarding tax strategies for individuals and families, tax planning for businesses, investment planning, and planning for the future. This is an excellent tool to use as you begin to prepare for your 2022 tax filings.

If you have any questions about the guide or its content, please call our office. We are here to help!

2022 Tax Planning Guide