“Real World” Personal Strategy Blog
Commonly-overlooked breaks
March 9, 2010 by Randall Hancock and Martha Echols
We are not in a position in which we have nothing to work with. We already have capacities, talents, direction, missions, callings.
- Abraham Maslow
We’re getting closer and closer to D-Day (April 15th: “Done Day”) around here, and we’ve already had quite a tax season. This truly is our favorite time of year–we get to sit down with our friends and help them discover that the dread they were expecting when all was said and done…well, it wasn’t as bad as they feared!
We love the look on clients’ faces when they find out they have a refund waiting for them… though they expected to pay. Or, when they discover that the bill wasn’t nearly as bad as feared. And, of course, we mostly enjoy the face-to-face interaction with folks with whom we’ve been mostly interacting by phone or email.
So, if you’ve been putting it off…please don’t delay! Good things are in store for you when you “get ‘er done!”
This week, I wanted to make sure you knew about deductions which we routinely “discover” during these face-to-face sessions. I won’t be revealing any “trade secrets” here–but they’re common enough that even the best software can let you down (unsurprisingly).
Read on, and leave your feedback!
“Real World” Personal Strategy
Don’t Miss These 6 Commonly-Missed Deductions
Putting together this list may run slightly counter to my business goals–after all, we do get paid to do this on behalf of clients! That said, our mission is to ensure that EVERYONE in our area saves the most possible when the IRS comes calling! Some of these may seem small, but trust me when I say that they add up.
So, before you file those taxes, make sure you’ve considered…
1. Beyond Charitable Gifts
Most everyone remembers to count the monetary gifts they make to charities. But do NOT forget that expenses incurred while doing charitable work can be deducted effectively.
You can’t deduct the value of your time spent volunteering, but if you buy supplies for a group, the cost for the goods is deductible. Or, if you wear a uniform while volunteering (for example as a hospital volunteer or youth group leader), the costs of that apparel and any cleaning bills also can be counted as charitable donations.
So can the use of your vehicle for charitable purposes, such as delivering meals to the homebound in your community or taking the Scout troop on an outing. The IRS will let you deduct that travel at 14 cents per mile.
2. Certain Job-Hunting Costs
Yes, college students cannot deduct the costs of hunting for that new job across the country… but already-employed workers can! Most costs associated with looking for a new job (in your present occupation), including fees for resume preparation and employment of outplacement agencies, are deductible — as long as you itemize. The trick, as with other itemized expenses, is that these costs (along with other misc. deductions) must exceed 2 percent of your adjusted gross income before they produce any tax savings. But the phone calls, employment agency fees and resume printing costs might be enough to get you over that income threshold.
3. Summertime Day Camp, Dependent Care
Millions of working parents know to claim the Child and Dependent Care Credit. But some parents overlook claiming the tax credit for child care costs during the summer. This tax break applies to summer day camp costs! The key here is that the camp is a day-only getaway that supervises the child while the parents work. Unfortunately, you can’t claim overnight camp costs (too bad, for camp directors!).
Remember, also, this can be for children AND other dependents. If you have an adult dependent who needs care so that you can work, those expenses can be claimed under this tax credit.
4. Deductible medical costs
Many taxpayers don’t even shoot for these, because of the 7.5 percent of adjusted gross income threshold required before you can claim any medical expenses. However, it’s easier to clear that hurdle if you don’t overlook “miscellaneous” medical costs. Some of these include: travel expenses to and from medical treatments, insurance premiums you pay for from already-taxed income and even alcohol or drug abuse treatments.
Further, self-employed taxpayers who are not covered by any other employer-paid plan (like one carried by a spouse), can deduct every cent of health insurance premiums as well, “above the line” on the 1040 form!
5. Retirement tax savings–more than just the IRA
There’s a credit called “The Retirement Savings Contribution Credit” which was created to give moderate- and low-income taxpayers an incentive to save. When you contribute to a retirement account, either an IRA (traditional or Roth) or a workplace plan, you can get a tax credit for up to 50 percent of the first $2,000 you put into such accounts. This means you get a $1,000 credit–much sweeter than a simple deduction!
6. “Green” home improvements
Whatever your opinion of “climate change”, the tax code has an opinion–and it wants you to agree to the tune of paying you! You can now claim a possible credit of up to $1,500. This covers such relatively simple things as adding insulation, energy-efficient exterior windows and energy-efficient heating and air conditioning systems.
While some of these may seem like “pocket change”…just a few minutes of effort can pay a nice hourly rate! And, better in YOUR pockets than in Uncle Sam’s, right?
So, I hope this helps.
New credit card rules can trap you
March 1, 2010 by Randall Hancock and Martha Echols
“Old times never come back and I suppose it’s just as well. What comes back is a new morning every day in the year, and that’s better.”
- George Edward Woodberry
Last week, I sent a note re: avoiding an audit, and I’ve heard from quite a few friends and clients who passed it along to *their* friends and family for whom (I hope) it’s especially useful.
THANK YOU!
As you probably have gathered, I write these weekly blogs because I sincerely desire to offer my experience and expertise to the tax & financial issues which too often become rushed in the midst of the tax season crunch. I read every response, and I’m so grateful to be connected to a group of families & individuals who trust us enough to invest their hard-earned money in our assistance.
And, of course, I’m always grateful for your referrals–they’re the lifeblood of our firm. While many tax professionals spend an arm and a leg for expensive advertising or have weird, costumed temps waving from street corners, we’ve found that our BEST advertising is the relationships we maintain with our clients and friends. No, I’m not averse to advertising our services–it’s simply that friends who are referred by our clients turn out to be our best kind of clients.
So, thanks for your continued referrals!
This week, I wanted to give you a “heads up” about the new credit card rules which went into effect last week. You should know about some changes which affect YOU.
Read on, and leave your feedback!
“Real World” Personal Strategy
How To Use New Credit Card Laws To Your Advantage
You may not have heard, but a new credit card law (”The Card ACT”) went into effect last week. The provisions of this new law that will impact most of us are the ones around interest rates, over-limit fees, payment allocation, and monthly statements. Now, if you don’t use credit cards in your family life, this doesn’t apply to you…but most people do, and you should know about what’s now being done by credit card companies in response to this new law.
So, here is a quick summary of what you should know so that you can take full advantage of these pro-consumer changes:
Interest Rates
The new rules will make it harder for credit card companies to raise a customer’s rates across the board. Under the so-called “universal default practice”, a consumer who was late on a payment for one credit card might have seen the interest rate rise on that card and another, unrelated credit card.
But now… interest rate hikes are going away during the first year an account is open and on existing balances. However, banks and card companies will still be able to raise interest rates in *some* cases, such as when you are more than 60 days late paying your bill or an introductory rate expires after six months.
Another important exception: Issuers can raise your rate before the first 12 months is up if your rate is “variable” and tied to an index–and that index rises. These indices are at historic lows, but when rates begin to rise (to keep inflation at bay), so will payments.
Over-Limit Fees Rising
Another major change involves the fee charged when a consumer charges more than his or her credit limit. Until now, many card companies have allowed consumers to continue charging beyond set limits–tacking on sometimes hefty over-the-limit fees in the process. Cardholders will now have to “opt-in” for over-the-limit spending.
How Payments Are Applied To Balances
With the new rules, card issuers have to apply payments to the part of a bill with the higher interest rate. For example, if an account has a $5,000 balance with a regular rate of 15 percent, and a $5,000 balance at a promotional rate of 5 percent, the monthly payment must be applied first to the balance with the 15 percent rate. This is good news for the consumer.
Monthly Statements
Credit card statements will have to show how long it will take to pay off a credit card if only minimum payments are made. The statements will also have to show how a consumer may pay off the entire bill in 36 months if payments are increased.
Lastly, you should be aware that, because of these new rules, credit card issuers will be forced to find other sources of revenue. Already, we’re seeing card companies take an “airlines” approach–identifying ticky-tack fees which can be justified as a “normal” course of business. Rewards transactions & international charging are two very-common places which card issuers are already applying fees. So watch your statements carefully.
And, of course, we’ll be watching YOUR information even more carefully–if you let us!
I hope this helps.
Audit-proof your life
February 24, 2010 by Randall Hancock and Martha Echols
“The past does not define you, the present does.”
- Jillian Michaels
I hope your weekend went well–our family has been enjoying the Olympics, and, in particular, many of the stories which go with it.
If you’ve paid any attention, you probably heard about American, Lindsey Vonn. She’s known as perhaps the world’s top female skier having dominated the World Cup the last couple years–but she entered these Olympics with a serious shin injury which left her hopes seriously dimmed.
Well, in her first event, she came through.
And the sheer explosion of joy when she saw her time…well, it will bring tears to your eyes. Watch it here:
http://www.nbcolympics.com/video/assetid=04fb8dfd-11ac-413d-88ad-efb130f93ebd.html#emotional+victory
It’s stories like this which always make the Olympics compelling, in my opinion–the story of lives in pursuit of an audacious goal.
Now…there’s stories like this, and, of course, the stories of our own lives which capture most of our attention. And here’s a BAD chapter to live through: an IRS audit.
We’ve dealt with this for clients in the past, and it’s never fun. So, with that in mind, I’ve put together some excellent ways to MINIMIZE your chances of getting audited. Unfortunately, I can’t *guarantee* that you would never get audited…but following this advice will significantly reduce your chances.
Read on, and leave your feedback!
“Real World” Personal Strategy
8 Ways To Keep The IRS Audit-Hounds at Bay
1. Don’t make indefensible claims
There are so many old wives tales saying that certain items trigger an audit: home office deductions, passive losses, schedule C (sole proprietorship) activities, etc. But you really can’t predict the trigger (and you can drive yourself crazy trying), but you *can* adopt the “be reasonable” mantra about every item on your return (with our help, of course), including these. So if you don’t have a decent claim for a home office, we’ll help you not to claim it. If your money-losing sole proprietorship is really more a fun hobby, treat it as such.
Look–don’t be scared to take deductions and losses you’re entitled to, but don’t take tax positions you aren’t comfortable defending. If you take reasonable tax positions, you’ll likely find you won’t end up needing to defend them. And if you do face an audit, it will likely be far easier.
2. Make sure it all adds up!
This seems like it should go without saying, but make sure you add, subtract and multiply accurately. Check your numbers through each step and do some simple math checks when you finish. If you do make a math mistake, you are likely to get a math correction notice from the IRS. This isn’t an audit. But our goal is to minimize your interaction with the IRS bureaucracy, which, ah… isn’t known for the best mail handling practices.
3. Don’t miss a 1099
This can be confusing, because the Form 1099 comes in many varieties, including 1099-INT for interest, 1099-DIV for dividends, 1099-G for tax refunds, 1099-R for pensions and 1099-MISC for miscellaneous income. These forms are sent by payers of such funds to both you and the IRS.
So regardless of how many 1099s you receive, make sure they all are accounted for on your return. There are also Forms 1098 which lenders send (to you and the IRS) recording how much interest you paid. The IRS matches your return against the 1098s and 1099s. So one sure way to guarantee an IRS query is to fail to account for something! If a Form 1099 is wrong–say it reports more income than you had–you can explain or deduct it on the return, but you need to first report it.
4. Report “just enough”
I’m not talking about under-reporting income, or holding necessary information back. But you’d be surprised how many professionals and amateurs alike try to submit too much *supporting* information. True, if your return is complex, you may need to add explanations or disclosures in footnotes. Be concise, truthful and accurate, but don’t provide copies of sales agreements, settlement agreements, bank statements, etc., unless you are later asked to by the IRS.
Disclosures can be made on regular paper or special IRS forms. A Form 8275 “Disclosure Statement” on plain paper can be used any time you need to disclose something that can’t be adequately disclosed on the forms. Form 8275-R “Regulation Disclosure Statement,” is for disclosing positions that are contrary to IRS Regulations or other authority. You shouldn’t be filing a Form 8275-R–or taking a tax return position that would require it–without professional help.
Frankly, though, any disclosure statement should be checked with someone who can take you by the hand and ensure it’s done properly (ahem).
5. Don’t fight what you don’t need to fight
Here’s where some clients have gotten in trouble in the past, despite our admonitions: If you take reasonable tax positions, and complete your return accurately, checking your math, why should you pay a bill if the IRS sends you one? Frankly, it’s a matter of practicality (and wisdom) rather than principle. It just doesn’t pay to fight with the IRS on small matters. So don’t get into the bureaucratic system and risk bigger problems for a few dollars. Just pay it and move on.
6. Avoid minor amendments
Here’s the reverse situation of my previous point: amended returns are reviewed much more regularly than initial returns. So if you forgot a deduction or otherwise think you can get a small amount back by amending, think twice before amending your return (i.e.–consult with a pro). Consider whether you might have bigger problems if other matters on your return, unrelated to the amendment, are reviewed. Yes, you can win a battle…and lose a larger one.
7. Don’t ask for cash
Perhaps you’ve received a notice that you are entitled to a refund. Well, you might consider applying it to your next year’s tax payments, rather than asking for the refund in cash. If you have a big refund, you’ll simply have a lower “profile” to the computers and to the bureaucrats if you file a return applying a whopping refund to estimated tax payments for the current or future years. This logic applies to both initial returns and to amended ones.
8. Go with a pro
Yes, this is a bit self-serving–but I’ll also make a “damaging admission” here: some tax professionals argue that a return prepared by a professional is less likely to be audited. However the facts are that there’s little reliable data to support it. That being said, having a professional prepare your return–or at least advise on anything quirky–is simply a wise investment.
So to absolutely ensure that whatever happens, you’ll have someone at your side–give us a call!
And a last word: No matter how careful you are, there’s no way to guarantee you’ll never have a tax controversy. Sometimes your number just comes up. But when your number is called…make sure you aren’t alone.
I hope this helps.
Valentine’s Day follow-up
February 16, 2010 by Randall Hancock and Martha Echols
“Lots of people want to ride with you in the limo, but what you want is someone who will take the bus when the limo breaks down.”
- Oprah Winfrey
So, this is the big question of the week: how did Valentine’s go?
Some say it’s a “Hallmark Holiday”, but well–some spouses think otherwise, right? Well, if you blew it, I’ve heard that it’s NEVER too late. Make this week count, my friend.
Now this past weekend’s festivities aren’t the only experience I have with the language of love. You see, we meet with married couples almost every week in the course of preparing taxes and handling other such matters. It’s part of what we do–and, as we do so, we get sort of a crash course in marital communication.
Before you get worried–know that we don’t pass judgment on anybody’s marriage! Everyone has their own, unique relational dynamic. And every marriage works a little bit differently–it’s part of what makes it a wonderful institution.
That said, however, I’ve noticed that *finances* can be a major sticking point in a good marriage.
But there are simple steps you can take (five, by my count), which will ensure that you don’t ever fall into the trap of letting a good marriage be spoiled by money miscommunication.
Read on, and leave your comments! And, of course, if you need help with any of this, that’s exactly what I’m here for!
“Real World” Personal Strategy
Financial Communication In a Marriage
Money problems can ruin the love affair with your spouse. The work of blending two lives in harmony requires certain basic commitments. It’s a fact that many families today are financially troubled.
Most of these are in denial. The rest of them are looking for a quick fix. Even a financial planner can’t help unless the couple is willing to make five simple commitments. You can always choose to find something to fight about. But if you are serious about removing the financial obstacles in your love life, you should commit to the following money management rules.
1) First, take the time to provide open accounting to your spouse. Most financial arguments are not about how to spend your money–but about how the money was actually spent. Just like every publicly traded company is required to give a public accounting of its finances, couples should do the same. In the public sector, it’s considered a scandal when a corporation fails to provide its financial information in a timely fashion. The same rules should apply at home. Financial accountability, openness, and honesty are essential in marriage.
2) Next, make saving investment in yourselves your first priority. Pay yourself first. Couples should agree on a savings and an investment rate and should prioritize their savings above all other budget categories. Savings should be automated and protected from impulse spending habits.
I’ve come to believe that savings should even be prioritized above debt reduction. I’ve found that couples that are in debt cannot seem to get out of debt because they are using what should be going into savings to service their debt, rather than adjusting their lifestyle so that they are spending less than they make.
3) Set a limit on what you can spend without first getting the approval of your spouse. Each spouse must sign off on spending that might be a budget buster. If you are young or your finances are in trouble, the amount should be fairly low. As you get more experience and your finances are in harmony, you can raise the amount. Any purchases above that amount should require the agreement of both spouses.
In the same way, any purchases beyond what was budgeted should require the agreement of both spouses as to which budget category is going to be reduced in order to make up the difference. If your spouse asks you to wait before making the purchase, lean toward waiting graciously. Ask what you would do if you did not have the money at all. Then, do that instead. Delaying a large purchase even by a month can significantly increase your financial health.
4) Set rules for the acceptable use of credit. In my experience, the easy use of credit cards ruins much financial harmony. It is better when the use of credit cards is limited to only certain required budget items. Using a credit card for groceries or gasoline may be harmless. But when credit cards are used for clothes or eating out, optional spending is unnecessarily inflated.
There are several advantages to using credit cards. But each of these advantages becomes powerful disadvantages for a family struggling to make ends meet. Credit allows couples to avoid asking the tough question about what they would do if they did not have the money. Credit makes spending easy and simplifies check-writing. These advantages are as helpful as giving an alcoholic a place to sleep in the back of the bar.
Either spouse should be able to veto the use of credit cards entirely. Only if both parties agree to the use of credit cards, should they be allowed – and then only within certain guidelines.
Credit should only be used for specific required monthly categories, and then only by the spouse who is less apt to make extra purchases on impulse. If you are struggling with your finances, stop using credit cards entirely.
5) Lastly, agree together that ignorance is no excuse! Both parties must be willing to learn. Just like a good love life, finances cannot be handled well by just one party. Many problems stem as much from ignorance and abdication by one party than spending by the other. If you don’t have the time or the interest to be involved in the family’s finances, then you may be the problem. Ask for help and start learning.
Look, I’m not a marriage counselor. But I DO know good communication when I see it.
I hope this helps.
Who ‘dat preparing your taxes?
February 10, 2010 by Randall Hancock and Martha Echols
“Don’t wish it were easier, wish you were better. Don’t wish for fewer problems, wish for more skills. Don’t wish for less challenges, wish for more wisdom.”
- Earl Shoaf
Congratulations to the Saints–the Super Bowl was a lot of fun to watch (for a change!), and I think almost everyone is happy for New Orleans (except, perhaps, Indianapolis). Oh, and in case you’re wondering, “Who Dat” is the Saint’s rallying cry–I didn’t have a sudden grammar breakdown (because I KNOW I would hear from a few of you, if I didn’t make that clear!).
And, the ads didn’t completely disappoint either. My favorite was Betty White clamoring for the football in a huddle (Snickers)–which was yours?
So…moving in to your world a bit closer, I wanted to first ask you: Do you have any questions about getting your taxes prepared which I can answer? A big part of why I post these weekly blogs is to ensure that YOU have a “lifeline” when it comes to getting your taxes handled properly.
So please do feel free to drop me a note with any questions–and your thoughts on my blogs are welcome, as well.
You’ve probably figured out that I’m not your “normal” tax professional. “Normal” is a bit more like what most *other* families have to deal with, and I address it in this week’s Strategy Note…
“Real World” Personal Strategy
Mistakes Made During Tax Season (Part 4)
Choosing a Tax Professional Who Doesn’t Relate to YOU
Most people don’t realize this, but many tax professionals live in a whole different world.
It’s a world with its own language, and it can be mind-numbing for the normal tax professional. “Schedule C”, “Offer In Compromise”, “Comparable Contributions”…blah, blah, blah. And when you sit down to talk with these guys, that’s all that comes out of their mouth! Which is why I mostly try to avoid other tax professionals.
Many CPA’s have a ton of experience in complicated accounting practices, doing very complex audit work and usually doing a really great job helping some large business or very high net worth rich guy with diverse investments and tax havens. But, for most tax returns that are filed each year … nah.
Look, does this sound like your tax return? I didn’t think so. You are not alone. The majority of regular middle income folks don’t want to wade into the swamp of all the stuff that other CPA’s and tax professionals deal with. They just want it done right, get the most money back from Uncle Sam, and they want it done fast.
Am I saying all these guys don’t know what they’re doing? Absolutely not. There are some Certified Public Accountants who take the time to keep up with the latest tax laws and are still able to speak the language of the client. But, in most cases you are better off finding a tax preparer who is good at doing what *you* need done. And in this case, if the tax professional prepares a lot of middle income tax returns already, that’s even better.
Think of it this way: Would you use a sledge hammer to hang a picture frame? (I didn’t think so.)
Remember: Go with a tax professional with TAX preparing experience, not just auditing or accounting or something else that doesn’t relate to you!
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I hope all this helps. To your family’s financial and emotional peace…
Don’t forget the love
February 1, 2010 by Randall Hancock and Martha Echols
“Character is doing the right thing when nobody’s looking. There are too many people who think that the only thing that’s right is to get by, and the only thing that’s wrong is to get caught.”
- J.C. Watts
Well, I wanted to start off by giving you a little “nudge” to make sure you at least *remembered* that the big V-Day is coming. Look–you may call it a “Hallmark” holiday, but your spouse may think otherwise. So, just…don’t forget!
And further, before I get into this week’s Strategy Note, I did also want to say one last thing re: the Haiti earthquake:
Congress has just passed legislation letting you take a 2009 deduction for contributions of cash (but not property) on behalf of earthquake relief before March 1, 2010. That new law also eases recordkeeping requirements for “accelerated” deductions, especially for those you make by phone. If you give by text message, for example, your phone bill satisfies the new requirements if it shows the name of the organization, the date of the contribution, and the amount of the contribution.
So–if you need to get your tax bill down, that’s a nice way to accomplish two things.
Moving on to this week’s Note, many in our profession are leery about guaranteeing their work. We accountant-types can be a fussy bunch (which is probably appropriate, given our work). But I wanted to go out on a limb here, and give you some thoughts on what to make sure you’ve got from someone who’s handling something as sensitive as your tax info…
“Real World” Personal Strategy
Mistakes Made During Tax Season (Part 3)
Working Without A Net
Do you have an accountant that guarantees their work…in writing?
Sure, some guys might say: “We’ll make it right if we screw up”, but then the stuff hits the fan and they fight you every step of the way.
I’ve heard too many horror stories about taxpayers getting a letter from the IRS, then they take it to their accountant, and then the letter sits on a desk gathering dust.
Or stories about the CPA who makes some calls on your behalf, but then you get charged an arm and a leg in the process. Or sadly, a taxpayer doesn’t get any help from the person who prepared their taxes for them so they “go it alone”, call the IRS themselves and figure out what to do and not to do during this normally ugly IRS correspondence … THIS can be a nightmare!
Don’t let that happen to you. You need to have a written understanding with your tax professional that you won’t be left in the lurch. Oh, and also-does this guarantee actually do something you want it to?
I’ve seen some accountants guarantee they will file your taxes for you by April 15th or they will file an extension for you. Well…great! That sure makes you feel good in the morning, doesn’t it? Other weak guarantees I’ve seen in the tax industry are, “We guarantee we will begin preparing your tax return the same day we meet with you.”
That means nothing to me. I don’t care when you start preparing my taxes. I want to know how long it is going to take you to finish it and do so without leaving out silly errors you know you should have caught.
So remember: the guarantees should be in areas you care about, like:
Tax Return Accuracy … Speed of Service … Most Money Legally Yours … Ongoing IRS Protection For Years After Filing …
These are the things YOU care about! Make sure the tax professional you choose stands behind these critical areas of tax filing so you get the most out of your tax filing experience.
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I hope all this helps! To your family’s financial and emotional peace…
The wrong professional
January 26, 2010 by Randall Hancock and Martha Echols
“Regret for the things we did can be tempered by time; it is regret for the things we did not do that is inconsolable.”
- Sydney J Harris
Thanks for all of your notes, feedback and phone calls about last week’s post re: Haiti. That crisis seems to have affected the world in an unusual way–and it’s difficult to wade through our daily lives in the midst of such devastation “down there”. Our world here is so different, so untouched by that kind of devastation, that our “problems” really should be re-assessed in the light of the very real blessings we all enjoy.
Yes, even with its flaws, our nation has created a much better life (at least circumstantially) for so many people…and we should be thankful.
We did hear about a few good places to lend a hand (or a donation) for the Haitian crisis. Here’s a few of the suggested links:
These are notable for the fact that your donations will be most efficiently used (and not to solicit even more donations, as is so often the case with so many huge organizations).
But, as with last week, onward we must go.
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It’s “high noon” for tax season, right now…and we’re receiving a TON of phone calls.
That being the case, I thought I’d return to my series addressing the different mistakes families make when choosing a tax professional.
Let me know your thoughts…and, of course, if you’d like to talk this over with us we DO have some open appointments for now. That will quickly change, however. Call or email soon!
“Real World” Personal Strategy
Mistakes Made During Tax Season (Part 2)
Choosing The Wrong Professional
Unfortunately, with the way that most tax professionals and CPA’s present themselves to the world, it seems like we’re all the same. We all seem to offer the same services, for pretty similar fees. If I weren’t working every day in this industry, I’m pretty sure I would think that all accountants and CPA’s were the same. Nothing could be further from the truth.
You see, each tax professional does have certain qualifications. Some might be experts at this sort of tax law, or in working with farmers or with getting money back through IRS representation, or a whole variety of different things…but are they really providing what you, the consumer, wants?
What do you want from a tax preparer?
When I sit down and talk with regular consumers, here’s what I discover:
You want to be able to work with a caring professional…NOT one of those “cattle call” shops, where you’re squeezed in with a bunch of other people, and seen by harried, poorly-trained employees that just took a basic tax course.
You want an accurately filed tax return. You want the whole thing broken down in terms that you understand, and in a way that you don’t need a translator to communicate. You want there to be processes in place to ensure that the most money is kept out of the grasping hands of Uncle Sam, and in your wallet (legally).
You want a “heads up” about future ways you can legally add deductions and make sure that you can get even more money back in the future. You want assurances everything your tax preparer is doing for you is valid and correct, so a guarantee(s) is essential to the process.
And of course, you want do it fast. Look, I know this is a big deal for consumers…you don’t want your accountant pushing back at you all the time, saying “give me more time”, when you know it’s not because they’re working hard on your behalf, but that they’re so poorly organized that they’re not getting ANYBODY’S work done on time!
Oh, and if you ARE getting a refund, you want a tax firm who can get you the most money back the fastest … with the most electronic filing options available.
Here’s the bottom line: You want professionalism…accuracy … you want clarity … you want to be aware of beneficial tax options … you want peace of mind … you want an efficient use of your time …. you want your refund money back in your hands fast …. And at the end of the day, you want to KNOW you got the most money back from Uncle Sam AND you know the IRS will stay off your back so you can sleep like a baby at night!
If the accountant or tax professional you are talking to can’t do these things, you need to call one that can.
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I hope all this helps. To your family’s financial and emotional peace…
Haitian blues
January 18, 2010 by Randall Hancock and Martha Echols
He who loses wealth loses much; he who loses a friend loses more; but he that loses his courage loses all.
- Miguel De Cervantes
I’ve been deeply affected by what happened in Haiti last week. It’s shocking, painful and the worst part of it all is how uncertain that nation’s future will remain to be for some time.
How have you been processing that event? Part of what often makes us all numb to these disasters is that “daily life” must go on. So there’s a natural disconnect.
Here I am watching images of severe devastation–there I am grabbing a caramel latte with a double shot of espresso.
But what are regular families to do, besides pray, donate … and care? Again, I’d be interested in your thoughts.
(And, as an aside, I’d also be interested to find out if you have located an effective place to send donations–the big organizations spend so much money on “overhead”, that I find it difficult to believe I’d get the most “bang for my buck” in donating. Any thoughts?)
And, while the scope of the tragedy is very different, “mopping up” after a family tragedy can be just as devastating.
Which is why, simply put, it pays to be prepared.
Yes, there have been significant estate tax changes this year–but did you know that estate planning is *much* more than just avoiding the “estate tax”?
In fact, the great majority of our clients aren’t in the wealth category affected by the estate tax legislation. But that doesn’t mean that estate planning shouldn’t be sought. You’ll see what I mean below.
(Oh, and by the way–next week, I’ll return to my surprisingly popular theme re: mistakes made during tax season. Thanks for your nice feedback!)
Let me know your thoughts…and, of course, if you’d like to talk this over with us we DO have some open appointments for now. That will quickly change, however. Call or email soon!
“Real World” Personal Strategy
Part 2: Common Myths About Estate Planning
A few weeks ago, I wrote about these common myths–still held by the majority of Americans.
In fact, as of this writing, it’s a fact that almost 60% of Americans don’t have a basic will, and that’s a big problem.
Much of the reason for this is because of misconceptions about estate planning, and I dealt with two already:
Myth 1. Only rich people prepare estate plans.
Myth 2. Everything goes to your spouse, if something happens.
Well, I’ve got three more for you to chew on, and dispense with.
Myth 3. After I create my will or living trust, there’s nothing else to think about.
Well, if you follow this line of thinking, it could lead to a lot of problems. For instance, once you set up a trust, you need to re-title the assets you want to transfer to the trust. Otherwise, the trust doesn’t help a thing.
On top of that, families need to periodically update their will or trust to reflect major life events, such as a divorce or the birth of a child. You’ll also want to revisit your estate plan if you move to another state.
In fact, it’s a good idea to meet with us every 3 or 4 years to make sure your plan is fully up-to-date. (Which, incidentally, we provide free to certain clients. Ask us about that.)
Myth 4. If I have a will, my estate automatically won’t go through probate.
Well, again–that’s not the case. In fact, ALL wills are subject to “probate”. This is a process in which a court determines whether the document is actually valid and ensures that relatives and creditors are notified. This process can take several months and drain thousands of dollars from your estate.
So here’s one way to avoid that entirely–create that living trust. Essentially, a living trust is a legal document you create which holds property (such as brokerage accounts and real estate). When you die or are incapacitated, the property is smoothly transferred to your beneficiaries. This transfer occurs outside of the probate process, which saves a TON of hassle.
Not everyone needs one of these documents, but it’s something which you can’t paint over with a broad brush. Which is why it’s important to walk with a competent guide on these matters.
By the way, if you own property in more than one state, a living trust is a no-brainer. Going through probate in multiple states is a nightmare.
Another advantage to a living trust is privacy. A will is a public document, and anyone can come to the probate hearing to see if any fights break out. Living trusts aren’t published in any courthouse, so people can’t gain easy access to them. That’s quite nice.
Myth 5. I could be held responsible for a deceased parent’s debts.
No, you’re not responsible for credit card debts from your parents.
In general, children aren’t responsible for a deceased parent’s debts, and in some cases spouses are often exempt as well. Again…you can’t paint it with a broad brush. But as a general rule, the estate is responsible for paying debts. If there isn’t enough in the estate to cover the amount owed, the debts usually go unpaid.
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I hope all this helps. To your family’s financial and emotional peace…
Don’t go it alone
January 11, 2010 by Randall Hancock and Martha Echols
“There are generations yet unborn, whose very lives will be shifted and shaped by the moves you make and the actions you take.”
- Andy Andrews
How did the first week of the decade go for you? How are you feeling … financially?
As I wrote last week, the start of the year is pretty important, in my opinion. And the LAST thing you need is to be stressed over finances.
Yet that’s, unfortunately, how many families start their year, this year.
Is there anything we can do to help? Yes, we live to help you with your taxes, but what truly animates me and my staff is the fact that assisting real families (like yours) can make a difference–not just in your “bottom line”, but in the peace with which you operate. That’s, really, why we do what we do.
So, do let us know if there’s anything at all we can help you with.
We’re getting very close to the point where we begin to see many folks walk through our doors with their tax information in hand.
(Oh, and last week my blog included a mostly-complete list of what you will need to get your taxes done. That’s a great list to forward to your friends!)
As folks start streaming through our doors, we end up reviewing the “work” of other tax preparers, as we take a look at previous year returns and numbers.
It’s not always pretty.
So–I thought I’d take some time to give you some pointers for how to avoid some big mistakes during tax time. Yes, it may seem self-serving. And, well…it is. I wouldn’t write this if I didn’t firmly believe in the work we do here.
But if, for some reason, you are in the market for another tax professional (you moved, or you haven’t yet come in to see us before), I hope you’ll find this useful.
Let me know your thoughts…and, of course, if you’d like to talk this over with us we DO have some open appointments for now. That will quickly change, however. Call or email soon!
“Real World” Personal Strategy
Mistakes Made During Tax Season (Part 1)
The “Free” Online Options
Did you know that we accountants like to joke to one another about how good these online software programs (TaxCut, TurboTax, etc.) are for our business? Firstly, they are NOT as “easy to use” as claimed, and secondly…they cost you an arm and a leg.
You might think they’re cheap. And on the surface, you might be right (though, recently, a $1 Billion class action lawsuit was filed in the federal court in Philadelphia alleging gross misstatement of fees and deceptive standards of the federal “FreeFile” program … so even on the surface, it wasn’t always cheap!). But I’m not even talking about the money for the service itself.
Using those programs can end up leaving hundreds, or even thousands of YOUR dollars in the coffers of Uncle Sam … even if you follow all of their instructions to a tee. I see it ALL THE TIME–frustrated clients bringing in prior year’s tax return, astonished at all the “hidden money” my staff and I are able to find for them!
Even worse…
Choosing The WRONG Method To File Your Taxes Could Put You In Some Serious Hot Water With The IRS!
Even if I didn’t owe a ton of back taxes, I still don’t want my record to show some IRS agent that there has been some discrepancy in the past so red flags start to fly and more bureaucratic people begin looking through all my past tax filings and current income holdings … basically taking my social security number and poking around in my private life!
(If you think they won’t do this, the wool might have already been pulled over your eyes.)
They can do a lot of things you won’t want them to do. However, if you keep a clean slate (no IRS correspondence with you related to filing your taxes correctly), the opportunities for them to mess with your personal stuff will be limited.
Here’s another reason why this is so important … now more than ever! New government regulations and changes to the IRS refund system are creating a BIG MESS in the tax industry… and the “Big Brand Names” (you know who I’m talking about) do NOT want you to know about it! In fact, they’re doing all they can this year to hold on to their business, and it is NOT good for you!
Yes, it can be seductive to “go it alone”…to trust a piece of software to point out possible deductions.
But it can be a big trap.
Just ask Tim Geithner.
Start the decade right
January 4, 2010 by Randall Hancock and Martha Echols
Be true to your work, your word, and your friend.
- Henry David Thoreau
Well, now the holidays are truly behind us, and this is the week where reality sets in for everybody.
No more family (which might be a relief?), no more parties, no more presents. Just…daily life. And, in my opinion, this week is actually crucial to how the rest of your year goes. Why?
Because intentions and actions matter. No, I don’t subscribe to a mystical ‘universal law of attraction’–but I DO believe that how we act out what we intend sets a sub-conscious belief system in place which can have an impact for months at a time.
In other words–do what you *intend* to do this week, and it’ll be much easier to carry that forward into more of 2010.
At least, that’s been my experience.
What about you? Do you find the beginning of the year to be full of opportunity? Or is it full of discouragement? I’d be interested to hear your thoughts.
Well, for my staff and me…it’s certainly full of preparation! This is one of our most intense years of groundwork for tax season, simply because the tax code is getting even MORE complex. And, truly–it seems as if I write that *every* year…which isn’t a great sign for families who are wanting to do their own taxes!
Well, for those of you who want our help (and it’s the vast majority of our email contacts), I’ve got a special incentive for you at the end of this email…AND, I’ve got a handy little list of what you’ll need to bring in. It’s mostly complete, but there may be certain situations where we’ll need other documentation to get you even more deductions…but, of course, we’ll let you know about that should the situation arise!
Let me know your thoughts…and, of course, if you’d like to talk this over with us we DO have a couple slots left! Call or email soon, though!
“Real World” Personal Strategy
A Mostly-Complete List Of What You’ll Need At Tax Time
After putting together this list and looking at it, I’m aware that it can seem quite overwhelming. However–have no fear! This is not intended to drown you in paperwork, but instead to give you a handy guide to ensuring that we’re able to help you keep everything you deserve to keep under our tax code.
As you’re getting your information together, this will help you guide your process. And, even if for some strange reason you won’t be using our cost-effective services this year, feel free to use this list as a handy guide…
Personal Data
Social Security Numbers (including spouse and children)
Child care provider tax I.D. or Social Security Number
Employment & Income Data
W-2 forms for this year
Tax refunds and unemployment compensation: Form 1099-G
Miscellaneous income including rent: Form 1099-MISC
Partnership and trust income
Pensions and annuities
Alimony received
Jury duty pay
Gambling and lottery winnings
Prizes and awards
Scholarships and fellowships
State and local income tax refunds
Unemployment compensation
Homeowner/Renter Data
Residential address(es) for this year
Mortgage interest: Form 1098
Sale of your home or other real estate: Form 1099-S
Second mortgage interest paid
Real estate taxes paid
Rent paid during tax year
Moving expenses
Financial Assets
Interest income statements: Form 1099-INT & 1099-OID
Dividend income statements: Form 1099-DIV
Proceeds from broker transactions: Form 1099-B
Retirement plan distribution: Form 1099-R
Capital gains or losses
Financial Liabilities
Auto loans and leases (account numbers and car value) if vehicle used for business
Student loan interest paid
Early withdrawal penalties on CDs and other fixed time deposits
Automobiles
Personal property tax information
Department of Motor Vehicles fees
Expenses
Gifts to charity (receipts for any single donations of $250 or more)
Unreimbursed expenses related to volunteer work
Unreimbursed expenses related to your job (travel expenses, entertainment, uniforms, union dues, subscriptions)
Investment expenses
Job-hunting expenses
Education expenses (tuition and fees)
Child care expenses
Medical Savings Accounts
Adoption expenses
Alimony paid
Tax return preparation expenses and fees
Self-Employment Data
Estimated tax vouchers for the current year
Self-employment tax
Self-employment SEP plans
Self-employed health insurance
K-1s on all partnerships
Receipts or documentation for business-related expenses
Farm income
Deduction Documents
State and local income taxes
IRA, Keogh and other retirement plan contributions
Medical expenses
Casualty or theft losses
Other miscellaneous deductions
We hope this helps, and we look forward to seeing you this year!
