NEWSLETTER

  NEWSLETTER

  July 2020



Remember, July 15 is now the tax filing due date because of the pandemic! It also means you may have a tax payment due on or before July 15. And if you have not yet received your federal stimulus check, this month's newsletter tells you what you should do. Also included is a recap of recent news that gives business owners more flexibility for getting your PPP loan forgiven.



Also included in the newsletter are some ideas for fun, summertime activities for the entire family.

Please call if you would like to discuss how this information could impact your situation. If you know someone who can benefit from this newsletter, feel free to send it to them.


This Month 

July 4th
     - Independence Day!!
 
July 15th
     - Individual Tax Returns for 2019 Due
     - Corporation Tax Returns for 2019 Due
     - 1st and 2nd Quarter Estimated Tax
          Payments Due         
 
Other July 15th Deadlines
     - Gift Tax Returns
     - 2019 IRA Contributions
     - 2019 HSA Contributions


Get Rid of Your Kid's Summertime Blues

Have some family fun with these activities (while social distancing, of course!)


Let’s be honest. This is a strange summer. With many recreation activities canceled or significantly altered because of this year's pandemic and social distancing guidelines, families need to be creative to keep their kids energized and engaged. Never fear! Here’s a list of activities to create a memorable summer for your kids:


  • Organize a family Olympics. The summer Olympics were supposed to be starting in Tokyo later this month. Instead, you can bring it to your back yard! Each family member can choose a country to represent and then participate in several competitions. They can be physical, like a race or throwing balls in a bucket or mental like a board or card game. Keep track of the winners and host a medal ceremony at the end!
  • Create a fun summer reading program. Just because school is over doesn’t mean kids should turn off their brains. Reading is a great way to stay sharp through the summer months. Create a goal of eight or ten books by Labor Day. Then sit down and figure out each child’s preferred genre. The goal is to find a topic or two that will energize your reader so it seems more like fun than a chore. Then go through your stash and check local libraries (if they are open) to find options.
  • Plant a midsummer garden together. Most people think you need to start a garden in the spring, but that’s not the case. There are several vegetables that can be planted in July and even August that will grow in time to harvest in the fall. The list includes beets, broccoli, cabbage, cilantro, kale, peas and turnips. Even if you already have a garden, start a new one!
  • Host a bake-off. Divide into teams (or individuals if you don’t have enough) and search for a cake recipe to bake against each other. Go bold! Tackle a recipe or design that will challenge you. If it works out, you get to eat some yummy cake. If it doesn’t, you can post a funny picture of your not-so-great attempt.
  • Make a time capsule. This is a good idea, but especially interesting during a unique time in your life like right now. Besides the normal time capsule stuff, jot down some of your feelings and predictions for the future. It will be fun to look back and compare against what really happened. Don't forget to set an open-by date so you can look forward to celebrating your family history.
  • Go on a scavenger hike. Hiking is fun, but hiking with a scavenger hunt twist is even better! Map out a route and make a list of things to find while you are on the trail. Make some of the items easy and some of the items hard. You can even mix in some geocaching while you are at it by looking for pre-hidden treasures. Check out https://www.geocaching.com/play to learn more.
  • Take a moon walk. Gather some bug spray and flashlights and go on a walk after dark. Some very interesting creatures roam the ground and sky when the sun goes down. Watch for bats, owls, foxes and more. Just make sure to keep proper distance and select a safe location for your walk.
  • 

Don’t let this unique summer keep you from making amazing memories. With a little imagination, you might be able to make it the best summer ever!



Important! You May Owe a Tax Payment This Month


Find out if you owe the IRS an estimated tax payment


You may owe the IRS a tax payment for your 2020 tax return and not know it.


Most Americans have income taxes withheld from their paychecks, with their employer sending a tax payment to the IRS on their behalf. This year, however, many more Americans will have to write Uncle Sam a check to pay a portion of their 2020 taxes on or before July 15. You may be one of these people!



Who Needs to Pay Now!


You may need to make a payment if one of the following situations applies to you:



  • Paychecks are under-withheld. Your employer withholds a portion of your paychecks for income tax purposes, then submits a payment to the IRS on your behalf. The amount that is withheld from your paychecks, however, may not cover your entire tax liability, resulting in you needing to write the IRS a check. If you're not withholding enough, ask your employer to increase the withholding amount from your future paychecks so you don't come up short again in the future.
  • Unemployment compensation paychecks are under-withheld. Unemployment compensation is subject to federal income tax and subject to income taxes in several states. While some unemployment benefit checks withhold a percentage of your payment for income tax purposes, you may need to pay more in taxes than is being withheld.
  • Self-employed workers. Unlike employees, self-employed workers don’t have income tax withheld from pay and must make four estimated tax payments over a period of 12 months. Self-employed workers include gig economy workers, freelancers, S corporation shareholders and partners in a partnership.


  • Retirees. You may owe tax on Social Security benefits, as well as income from investments distributed to you or other unearned income. A portion of pension plan distributions may be withheld, but many times the amount withheld does not cover your entire tax liability, resulting in an underpayment.
  • Sold a major asset. You may owe tax after selling an asset that results in a large capital gain, such as a house, or from the sale of securities.
  • Receive alimony. If you’re being paid alimony under a divorce decree entered into before 2019, the payments constitute taxable income to you. Alimony from post-2018 agreements, however, are not taxable.



What you need to do


Estimate your total income for 2020, then calculate your total 2020 tax bill and divide it by 2. Compare this amount to how much has been withheld from your paychecks, unemployment benefits and any other payments you've made to the IRS. If you're short, consider making an estimated payment by July 15 to make up the difference. This payment is made with Form 1040-ES.

If you do not make this payment on time, the IRS may impose a penalty plus interest on top of the underpaid taxes. Fortunately, you can avoid a penalty by paying at least 90% of the current year’s tax liability or 100% of the prior year’s tax liability (110% if your adjusted gross income for the prior year exceeds $150,000).

Help! My Stimulus Payment is Wrong or Missing!


Millions of Americans already received their economic impact payment. But what if you're still waiting or your payment was for an incorrect amount?



Here are some common scenarios why you may not have received your payment, or the payment you did receive was for an incorrect amount, and what you can do.


  • Your payment was sent to a closed bank account. If you didn’t update your banking information or mailing address before your payment was processed, your money will probably end up in the wrong location.


What you can do: You probably must wait. If your bank account on file with the IRS is closed or no longer active, the bank will reject the stimulus payment deposit and you will be issued a physical check to the address the IRS has on file for you.


  • Your check was sent to a wrong address. The IRS will send stimulus checks to the mailing address listed on your most recently-filed tax return. The IRS will also mail a letter with information about how and where the stimulus payment was made, but this letter will go to the most recent address on file.

 

What you can do: Change your address on file with the IRS by filing Form 8822. While it won't solve your immediate problem, your change will correct future issues. In the meantime, keep tracking the status of your payment by visiting the website Get My Payment. You can also try and contact the new people who live at your old address.



  • You didn’t get paid for your dependents or you think your check amount is incorrect. You are certain that you should have received a full $500 payment for each qualifying dependent and the payment was either not received or was for an incorrect amount.


What you can do: If you did not get the full amount you think you should have received, you will be able to claim the additional amount when you file your 2020 tax return.


  • You received a check for a deceased relative. With more than 300 million people living in the U.S., it probably shouldn’t be a surprise that some of the stimulus checks were mailed to deceased individuals. Unfortunately for living family members, you can’t keep this money.


What you nee to do: You should open the check, write VOID on the check and then return it to the IRS. If the payment was via direct deposit or a check received from the IRS was already cashed, you should write a personal check to the IRS to return the money.


Receiving the wrong amount of money in your stimulus check or not receiving a check at all can be very frustrating. But be reassured the IRS is doing everything it can to help you get the correct amount of money that you deserve.



More information: If you have other questions or concerns, the IRS has a question and answer resource. Click here to read through the IRS Q&A.


Small Business Owners Get Good News on PPP

Loan Forgiveness

Small business owners, self-employed workers and freelancers received some welcome news when Congress recently passed the Paycheck Protection Flexibility Act. This new law clarifies how businesses can qualify to have all or a portion of its Paycheck Protection Program (PPP) loan forgiven.


Here is what you need to know:


December 31, 2020 is the new deadline to spend loan proceeds. When the PPP program was rolled out this spring, businesses were given 8 weeks after loan funding to use the loan’s proceeds if they wanted to qualify for loan forgiveness. That timeline has now moved to 24 weeks. Due to the extended stay-at-home orders and further assessment of the pandemic, the new deadline is now effectively December 31, 2020.


More loan proceeds can be used for non-payroll expenses. The original law required 75% of loan proceeds to be spent on payroll. For businesses with high cost of goods sold or who had trouble convincing furloughed workers to return to work, hitting this 75% threshold was problematic. The new law reduces the amount of loan proceeds required to be spent on payroll to 60%.


More flexibility in fully restoring workforce. Borrowers now have through December 31, 2020 to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. There are three exceptions allowed for not having a fully-restored workforce by Dec. 31. Borrowers can adjust their loan forgiveness calculations because of:


  • Employees who turned down good faith offers to be re-hired at the same hours and wages as before the pandemic;
  • Difficulty finding qualified employees;
  • COVID-19 related operating restrictions


Loan terms extended. For loans that do not qualify for forgiveness, borrowers now have up to five years to repay the loan instead of two. The interest rate remains at 1%. Since your bank has 60 days to process your loan forgiveness application and the SBA has 90 days to process the request, your initial payment is now effectively five to six months after your forgiveness application.


What you need to do


  • Download EZ Application Form. If you are a self-employed worker, independent contractor or sole proprietor who has no employees, you may be eligible to use the EZ Loan Forgiveness Application. Click here to download the EZ form. Click here to download instructions for the EZ form.


  • Download Regular Application Form. If you aren't eligible to use the EZ Loan Forgiveness Application, then you'll need to complete the regular loan forgiveness application. Click here to download the regular application.


  • Stay in contact with your lending institution about when and how to complete the loan forgiveness application.



Consider reaching out to your legislators to let your voice be heard on how you were impacted and to share your story on your PPP loan experience as several U.S. Senators indicated that there will be more changes in the future regarding the program.

  June 2020



This month's newsletter details several reasons why you should look for other sources of cash instead of tapping into your retirement funds, along with identifying potential tax surprises if you are using any of the pandemic-related relief programs, including unemployment benefits.


There are also some tips on how you can help local businesses as they re-open their doors and an overview of changes coming to your banking experience.


Please call if you would like to discuss how this information could impact your situation. If you know someone who can benefit from this newsletter, feel free to send it to them.



This Month 

June 21

     - Father's Day!!

Think Before Tapping 401(k) as Emergency Fund


Do you need a quick infusion of cash?

Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, you may be able to take money out of a qualified plan, like a 401(k), or an IRA, with favorable tax consequences. But should you do it? You might view withdrawing money from a retirement account as a last resort.


Background


Among other changes in the CARES Act relating to qualified plans and IRAs, a participant can withdraw up to $100,000 of funds without paying the usual 10% tax penalty on distributions before age 59½. Plus, you can take as long as three years to pay the resulting tax bill, spread out evenly over the three years. If you repay the full amount within three years, you owe no tax.

To qualify for this program, you or your spouse must be diagnosed with COVID-19 or experience adverse financial consequences due to the virus such as being laid off, having work hours reduced or being quarantined or furloughed.


What are the pitfalls?


There are several reasons why you may want to avoid taking money out of your retirement accounts unless it's an absolute emergency:


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 the maximum amount of $100,000 that would have earned 6% annually tax-deferred for ten years, the value would have been $179,000.

It may be bad timing. Experts say it is 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 the recovery in the next few months or years.


You still owe income tax. Income tax is due unless you replace the full amount within three years. Also, depending on your situation, you could end up paying tax at higher rates than you would in your retirement years.


Better options might exist. Arranging a hardship loan from your 401(k) might be a better alternative for your situation. You avoid the taxable event of the withdrawal and you pay back yourself with interest. Other options include refinancing a mortgage with lower interest rates, taking advantage of payment relief from mortgage, rent or student loan payments or deferred credit card billing.


While it is an option, retirement plan withdrawals are not always the best choice. Think through all scenarios before withdrawing from retirement funds to cover emergency expenses.



Be Prepared for Pandemic Tax Surprises

Numerous new laws provide economic relief to individuals and businesses hardest hit by this year’s pandemic. This much-needed financial assistance, however, comes with a few strings attached.


Here are three potential surprises if you use the available economic relief packages:


• Getting a tax bill for unemployment benefits. While the $1,200 economic impact payments most Americans received does not have to be reported as taxable income on your 2020 tax return, there is currently no such luck with unemployment benefits. In addition to paying federal taxes on your unemployment compensation, more than half of states also impose a tax on unemployment benefits.


What you need to do: See if your unemployment compensation check withholds a portion of your pay for taxes. Even if your check does have withholding for income tax purposes, the withholding amount may not be enough. If possible, talk to your state unemployment office and try to get withholding amounts revised.


• Paying estimated tax payments. If you normally receive a paycheck from your employer, you may have never needed to write a check to the IRS to pay estimated future taxes. Your employer withholds your taxes from your paychecks and sends it to the IRS for you. If you’re collecting unemployment benefits, however, you may be required to pay tax on the unemployment benefits received during the first six months of 2020 by July 15, 2020.


What you need to do: Estimate the amount of tax you owe for all sources of income, then compare that number with the amount of money withheld from your income to pay these taxes. If necessary, send in quarterly estimated tax payments to the U.S. Treasury and, in some cases, state revenue departments. This must be done each quarter with the next payment due July 15. You may need to send money in on September 15, 2020 and January 15, 2021 as well.


• Reporting emergency distributions from retirement accounts: You may withdraw up to $100,000 in 2020 from various retirement accounts to help cover pandemic-related emergency expenses without incurring penalties. While you will not be required to pay an early withdrawal penalty, you will still be subject to income tax when filing your 2020 tax return.


What you need to do: If you plan to withdraw funds from your retirement account, reserve enough of the money to pay the tax! The amount you reserve depends on your potential tax situation so call for a tax review before taking money out of the account.

The New Face of Banking

It suddenly just got a whole lot more difficult to buy a home

The banking sector is the latest industry to dramatically change how it operates in response to the current economic environment. The most visible change for consumers are new requirements for taking out a mortgage.



Here are some tips for working with banks and other lending institutions in the midst of tighter lending requirements and a heightened awareness of staying healthy.




Save more for a mortgage downpayment. New requirements for taking out a mortgage are requiring borrowers to put down at least 20% and have a credit score of 700 or better. Unfortunately, the average credit score of U.S. citizens under the age of 50 is below 700. The short-term reality is that you may need to save for a bigger downpayment and actively manage your credit before getting your dream home.


Take advantage of your bank's mobile app. Social distancing is changing the way we interact in public and banking is no exception. Traditional bank tellers, drive through options, and in some cases entire branches, are being replaced with digital banking options and mobile deposits. This trend will surely accelerate in the aftermath of COVID-19. For the branches that remain open, visiting will likely be more restrictive. Smaller capacity banking spaces and appointments might be required to help banks control the flow of traffic.


Use digital payments for your purchases. While cash might still be king in the U.S. economy, consider using "germ-free" digital payments as retailers are steering customers toward electronic transactions. With businesses needing to adapt to new spending habits, innovation is going to steer towards digital payment technologies and make paying with cash more difficult in the future.



Look for lending deals. During these uncertain times, banks will be putting more effort into connecting with their customers. Bank leaders are making it a priority to personalize the banking experience with proactive marketing campaigns. Be on the lookout for special deals offered by lending institutions to help keep you as a customer.

Ideas to Help Local Business

Shuttered businesses are realizing that lifting lockdown restrictions doesn't mean a return to business as usual. Social distancing guidelines and a public wary of venturing into crowded environments means light customer traffic for many businesses.



Here are several ideas to help local businesses financially as they re-open their doors:

Continue buying gift cards. For many small businesses, positive cash flow is the primary factor whether they survive this economic downturn. Buying gift cards is a great way to get them the cash they need now, while still providing value for yourself down the road. Even better, if you are in a position to do so, consider giving a gift card to a friend who's negatively been affected financially. Also consider donating gift cards to schools, churches or non-profit organizations. Just remember to keep your receipts so you can potentially claim a tax deduction!


Tip more than usual. Of all industries impacted by the economic downturn, the leisure and hospitality industry is being hit the hardest. On top of the millions of workers in this industry that have filed for unemployment, even more have had their hours scaled back. When you order takeout or pay for a service, consider tipping more than you normally would. It may not seem like much, but every extra dollar helps.

Shop online locally. The prices you pay might be higher, but when you add the property taxes, local employment taxes and donations to school events that local businesses fund, the added costs are worth it. Also, with many retail shops restricted to limited foot traffic because of social distancing guidelines, online sales are currently a significant source of revenue for many small businesses.


Write a review. Reviews left on Google, Yelp, and other sites are a major source of new customers for local businesses and restaurants. Take the time to leave a positive review for each of your favorite local businesses so new, potential customers can find them.


Offer your services. With the change in spending habits, businesses are forced to adapt. If you have skills and knowledge that could help a small business make the transition, consider donating some of your time. Some examples include web development, marketing strategies, cash flow management and budgeting.

May 2020

COVID-19 uncertainty abounds for everyone. This month’s newsletter provides a round-up of tax-related laws to help with tax planning for 2020 as we all navigate the coronavirus pandemic. Also in this edition are ways to track your stimulus payment, tips to find cash, and how to protect your video conference meetings from unwanted visitors.

Please call if you would like to discuss how this information could impact your situation. If you know someone who can benefit from this newsletter, feel free to send it to them.


Events Happening This Month


May 10

-Mother's Day


May 25

-Memorial Day

Key 2020 Coronavirus Tax Changes

Coronavirus uncertainty abounds. Thankfully, by monitoring tax changes on your behalf, we can work together to navigate the right path for you and your family. Here is a round-up of tax-related laws and information to help with tax planning for 2020.


  • Early distribution penalty waived


  • The 10% early distribution penalty on up to $100,000 of retirement withdrawals for coronavirus-related reasons is waived during 2020. New tax rules allow tax liabilities on these distributions to be paid over a three-year period. So if you need the funds, you won't see your tax bill skyrocket in one year. Even better, you can return these distributions back into your retirement account over a three-year period and not be subject to the annual contribution limits.


  • Action: This could be a great way to handle emergency payments until you receive a stimulus check, unemployment payments, or a pending small business loan.


  • Required minimum distributions (RMDs) waived for 2020


  • Required minimum distributions (RMDs) in the year 2020 for various retirement plans is suspended. The corresponding 50% penalty associated with not taking an RMD is also suspended in 2020.


  • Action: Taking out distributions when the market takes a tumble can hurt retirement income for many years. This change allows you to wait to let the value in your retirement account rebound before you withdraw funds.


  • IRS installment agreement suspension


  • The IRS is suspending payments of all amounts due from April 1 through July 15, 2020. If you do not pay your IRS installment payment during this time your installment agreement will not be in default. Interest will continue to accrue on these installment agreements.
  • Action: Taking out distributions when the market takes a tumble can hurt retirement income for many years. This change allows you to wait to let the value in your retirement account rebound before you withdraw funds.


  • IRS installment agreement suspension


  • The IRS is suspending payments of all amounts due from April 1 through July 15, 2020. If you do not pay your IRS installment payment during this time your installment agreement will not be in default. Interest will continue to accrue on these installment agreements.


  • Action: Being on the bad side of the IRS is never fun. If you currently have an IRS installment agreement, look to take advantage of this delay.


  • Offers-in-compromise


  • The IRS will allow you until July 15, 2020 to provide additional requested information for any pending offers-in-compromise (OIC) and will not close out the OIC during this time without your consent. The IRS is also suspending any payments due under an OIC until July 15, 2020.


  • Enforcement activities suspended? Not so fast...


  • The filing and enforcement of liens and levies will generally be suspended. However, IRS Revenue Officers will continue to pursue high income non-filers and initiate other actions when warranted.


  • No new audits


  • The IRS will not initiate new audits during this time, but will act to protect the statute of limitations.


Ideas to Help Make Payments During Tough Times

How to get cash quickly when you're out of works


You’re not alone in trying to navigate the financial uncertainty during the coronavirus pandemic. Millions of American workers who lost their paycheck because of COVID-19 need to find creative ways to pay bills.

Here are 6 ways to get cash to help pay for your monthly expenses.


(1.) Apply for state unemployment benefits. Recent federal legislation expands traditional state unemployment payments from 26 weeks to 39 weeks. State unemployment offices are also administering an additional weekly payment of $600 to unemployment benefit recipients courtesy of the federal government. This additional $600 weekly payment runs through July 31, 2020. If you have not already done so, visit your state's unemployment insurance website to fill out your application. Even better, this federal unemployment assistance applies to self-employed workers and part-time workers.


(2.) Look to your retirement accounts. While not ideal, you can withdraw up to $100,000 penalty-free from your retirement accounts. You can then pay it back within the next three years without penalty or being subject to annual contribution limits!


(3.) Talk to your banker/landlord about a mortgage or rent deferral. Recent legislation suspends required payments on certain loans and halts foreclosures for at least 60 days. But you must contact your lender to discuss the specifics of your situation. It may be trickier to work with landlords to defer rent payments, but many property owners have signaled a willingness to work with tenants over the next several months to defer or forgive payments.


(4.)  Talk to lenders about credit card payments. Call your credit card company to see if they are willing to defer your payment for several months. While credit card companies haven't explicitly said that consumers can skip or defer credit card payments, they have encouraged anyone experiencing financial hardships because of the coronavirus pandemic to contact their customer service teams to discuss their individual situation.


(5.) Tell everyone in your network that you could use work. While the U.S. unemployment rate is close to 20%, that still means 80% of Americans are still working. You may have numerous friends and family that could help you weather the financial storm for several months. But you won't know unless you ask.


(6.) Downsize your budget. If you normally don't create a monthly budget, now would be a good time to start. Keep track of where every dollar goes. Identify non-essential spending you could put on hold until you find your next job.

Protect Your Video Conference Meetings

Avalanche of new remote workers creates latest playground for hackers

Named for the company Zoom, the unfortunate first high-profile victim of this phenomena, zoombombing occurs when internet trolls hack video conference meetings and join as uninvited attendees. After infiltrating a meeting, the hackers then have their fun, doing everything from performing harmless pranks to posting sexually explicit content.

Zoombombing defined


Ideas to keep your meetings private

You can protect yourself, your friends and your company while using popular video conferencing tools with these tips.


  • Monitor meeting attendance. Designate an employee to monitor the attendees of your video conferencing meetings. By assigning a moderator (host), attendees can be removed or dismissed.


  • Create a waiting room for new attendees. Most conferencing platforms have a feature called a waiting room. When this feature is enabled, each user who connects to your meeting is put in a queue. The meeting host then approves each person waiting in the queue for admission to the meeting.


  • Turn off screen sharing for everyone but the meeting host. A favorite zoombomber prank is to hack into a meeting, share their screen and then draw something really funny or inappropriate. Consider only allowing the meeting host to share a screen and to give permissions to others who subsequently want to share a screen.



  • Password protect your meetings. As a meeting organizer, you can also choose to password-protect your meetings. Don’t forget to distribute the password to all attendees prior to the meeting.


  • Carefully choose your video conferencing service. With many different companies offering video conferencing services, it can be difficult to find which company features the best security measures. Take the time to do your homework to find the platform that’s right for your business.




April 2020

The IRS rolled out deadline extensions and new programs to help individuals and businesses navigate the COVID-19 pandemic. A recap of these announcements is included here for your review.
Also in this month’s edition is an interesting tax quiz to see if you can guess which states have the highest taxes! All this plus an interesting way to keep your spare change digitally. These are challenging times. Rest assured as things change on the tax landscape, you will be among the first to know. Please stay safe.

This month:


April 15 (Extended to July 15)

-Individual tax returns due

-C Corporation tax returns due

-First-quarter 2020 estimated tax due


April 12

-Easter Sunday

Tax Deadlines Move to July 15

The April 15 federal income tax filing due date has been moved to July 15, the U.S. Treasury Department and IRS recently announced.

Here's what you need to know:


• The due dates for all tax payments normally due April 15 have been pushed back 90 days to July 15, regardless of the amount owed. This applies to all taxpayers, including individuals, trusts and estates, corporations and other non-corporate tax filers as well as those who pay self-employment tax.


• Payments that can be extended to July 15 include income tax payments and self-employment tax payments that are associated with the 2019 taxable year. Also extended are estimated income tax payments for the 2020 taxable year.


• The 90-day extension from April 15 to July 15 is automatic. No additional forms must be filed to receive the 90 day extension.


Some thoughts:

-While the federal government grants you an additional 3 months to file and pay your 2019 taxes, you may wish to still file your tax return by April 15. Here are some thoughts on different situations.


- You anticipate a refund. If you are expecting a refund, file your tax return immediately. A refund right now can come in handy.


An extension might still make sense. The normal tax extension filing moves the tax return date to October 15, 2020. While payments are now due on or before July 15, a simple extension buys you more time to file your tax return.


- Watch for state announcements. States are rolling out their own guidelines for extensions. Since most states require copies of federal tax return information, be prepared to still file by April 15. Remember, even if you wait until later to file your federal return and pay your tax, you may have to file your state and/or local return sooner.


What if I get a penalty anyway? Affected taxpayers subject to penalties and additional tax despite this relief provision may seek a waiver.


Rest assured, as the rules and deadlines change, updates will be provided. In the meantime, please stay safe during this challenging time.


New Law Requires Small Business

to Provide Paid Leave

Families First Coronavirus Response Act provides worker benefits

The Families First Coronavirus Response Act is a new program that offers COVID-19 assistance for both employees and employers.

This new law provides businesses with fewer than 500 employees the funds to provide employees with paid leave, either for the employee’s own health needs or to care for family members.

Here are the details of the new law's benefits:

• Paid Sick Leave for Workers: The new law provides employees of eligible employers two weeks (up to 80 hours) of paid sick leave at 100% of the employee’s pay where the employee can’t work because the employee is quarantined and/or experiencing COVID-19 symptoms and seeking a medical diagnosis.

• Other Paid Leave for Workers: Employees can receive two weeks (up to 80 hours) of leave at two-thirds the employee’s pay if they need to care for someone in the following situations: The need to care for an individual subject to quarantine, to care for a child whose school is closed or childcare provider is unavailable for reasons related to COVID-19.

• Extended Leave: In some instances, an employee may receive up to an additional ten weeks of expanded paid family and medical leave at two-thirds the employee’s pay.

• Companies will get paid back: Businesses who pay employees the mandatory sick and childcare leave according to the new law will get completely reimbursed through a payroll tax credit.

What it means for you:

• Employees can take the necessary time to recover from being infected with COVID-19, or to care for a loved one, without fear of losing their job or salary.

• Employers can help their employees financially while navigating COVID-19 related shutdowns.

Tax Quiz: Who's the Highest?
Take this trivia quiz and test your state tax knowledge!

Questions:

1. Thinking about buying a new house? Which state has the highest property taxes?
a. Texas
b. New Jersey
c. Illinois
d. New Hampshire

2. Which state will drive up the cost of your shopping spree with the highest sales tax?
a. Tennessee
b. Washington
c. New York
d. Arizona

3. Relocating for a new position? Which state will take the most taxes out of your new salary?
a. Hawaii
b. California
c. Minnesota
d. Oregon

4. If you are headed on a brewery tour, in which state will you pay more for a pint of your favorite adult beverage?
a. Alaska
b. South Carolina
c. Maryland
d. Tennessee

5. When planning a vacation, which state charges you the most for staying in a hotel?
a. Massachusetts
b. Connecticut
c. Colorado
d. Florida

Answers:

1.(New Jersey) 

Unlike most states, New Jersey does not allow counties and cities to impose their own sales tax, so these localities get all their tax revenue from property taxes. In 2018, the property taxes in the 8 most expensive New Jersey towns averaged more than $20,000 while another 47 towns exceeded $15,000!


2. (Tennessee)

At 9.53%, Tennessee has the highest combined sales tax rate in the nation. It's a tough pill to swallow when you consider that the same purchase made in Kentucky may cost only 6% in sales tax!


3.  (California)

Before accepting your new job, run the numbers to see how your take-home pay compares. California's top income tax bracket rate is 13.3%.


4.   (Tennessee)

The Volunteer State charges a beer tax of $1.29 per gallon. Fun fact: Tennessee is technically a dry state. The state leaves it up to individual counties and cities to determine whether alcohol can be purchased.


5.  (Connecticut)

Book a room in Connecticut and you'll pay a whopping 15% in lodging taxes. To fix a temporary issue with the state budget in 2011, the state bumped it up from 12%. The Nutmeg State must have gotten used to the extra revenue.

Spare Change Goes Digital

A clever new way to save...

With close to 85% of purchases made with credit or debit cards, many people have forgotten the satisfying clinking sound of tossing a penny, nickel, dime or quarter into a glass jar of spare change. But all that is starting to change! 

In today's world of smartphones, several apps have digitized yesterday's jar of coins by sweeping electronic spare change into a digital jar to increase savings balances or pay down debt. For example, if you make a purchase for $1.89, the app rounds up your purchase to $2.00 and transfers the extra 11 cents into the app's account. Here are three of the more popular apps and how they work.
Popular digital savings players:

• Acorns. Acorns was the first app to jump on the idea of rounding up your purchase and stashing away the extra money. The app connects directly to your debit or credit card and sweeps the difference between the transaction amount and the next dollar amount into an investment account. Since its start, Acorns has added more products like checking accounts, debit cards, budgeting tools and IRA options. Fees range from $1 to $3 per month depending on the types of products you use. That may not sound like much, but it should if you calculate the effective cost for these small transaction levels. For instance, if the application collects $50 in a month and the Acorns fee is $2, you end up paying a fee of 4% per month for the digital savings account.

• Digit. Digit takes a different approach. Their algorithm tracks your spending and upcoming bills, then compares them against your checking account balance to figure out how much you can save. The app then automatically transfers that amount from your checking account to your savings account. You can establish three different savings goals with Digit. The app will then distribute the amount it sweeps from your checking account into each of the three savings buckets depending on how you prioritize them. Worried about overdrafts? You can set a minimum checking balance, so transfers won’t be made if you don’t have enough in the account. If that fails, Digit will reimburse you for the overdraft fees. At $5 per month, it’s one of the more expensive micro-savings apps. If interested, they offer a 30-day trial to test drive their digital savings tool.

• Qoins. Looking to pay down debt? Qoins might be the app for you. Like Acorns, Qoins takes the difference between each transaction and the next dollar amount, then aggregates the amount over the course of a month. But instead of investing this amount, Qoins makes a monthly payment to pay down the principal of a student loan, credit card or other debt. Qoins charges a fee of $2 for every monthly payment, so if you have many accounts, the monthly fee can add up quickly. In most cases, the interest expense saved on paying down debt early is more than the interest you can currently earn in a savings account.

The area of digital money saving applications is rapidly evolving. Before using any of these apps, it is important to understand their costs and risks involved, compared to other ways of saving money.

Is Your General Ledger Squeaky Clean?

Spring cleaning for your business should include cleaning up your general ledger

With spring now here, it’s natural to start thinking about doing some spring cleaning. But don’t limit the cleanup effort to your house — your business's accounting system and general ledger needs cleaning, too!

Here are five areas of your financial statements that may be due for a spring cleaning:

• Liabilities and Loan Accounts. All loans have two components: principal and interest. A portion of every payment goes to pay down the principal on the balance sheet and a portion goes to paying interest expense. These principal and interest amounts change every month based on the loan's amortization schedule. The most common mistake when recording your loan payments is assigning the entire monthly payment to EITHER principal OR interest expense.

Action: Conduct a timely reconciliation of balances per your loan statements to the value on your books.

• Payroll Accounts. Properly accounting for paychecks can be complicated. For example, gross payroll amounts and payroll taxes hit your income statement as an expense while employee tax withholdings go on your balance sheet until they are remitted to the appropriate taxing authority. Add in benefits and other taxes and you could have a mess.

Action: Periodically review your payroll entries against your payroll account. If you have not already done so, set up a separate payroll bank account and ask for help to audit or run your payroll for you.
Taking the time now to review these key accounts will ensure accurate financial statements and make future period closing activities easier to handle.

• Inventory . Inaccurate inventory on your balance sheet can have grave consequences. If your balance sheet shows more inventory than you actually have, you may not be able to fulfill orders and risk losing business. If your balance sheet shows less inventory than you have on hand, you might procure more inventory than you need. In both cases, you run the risk of having inventory you can’t sell.


Action: Perform a physical count and reconcile the amount against the inventory value on your general ledger. Conduct the necessary research and make the required adjusting entry to tie out your salable inventory value. If you have moved that inventory 3 times to get it out of the way, figure out a plan to get rid of it and turn it to cash, a donation or scrap.


• Accounts Receivable. In an ideal world, you provide a good or a service to your satisfied customer, who then pays you within an agreed-upon timeframe. Unfortunately, invoices get lost, priorities get shuffled, or a customer's payable contact leaves for another job. An open invoice could also simply be the result of a mistake.


Action: Now is a great time to get your accounts receivable ledger in order by running an aging report that highlights outstanding receivables that are past due. Focus on getting clients to pay these past-due invoices, clear up any misunderstanding, or send the bills out to be professionally collected. If you have salespeople, put a reduction in the commission plan if balances are not collected within 60 or 90 days. Salespeople can be great collectors when they have a financial interest!


• Fixed Assets. It's easy to leave old fixed assets on your balance sheet after they’ve been disposed. Doing this can create a whole host of problems, including an understatement of net income, tax compliance issues, and an inaccurate business valuation. State sales tax agencies also like to look through your fixed asset listing to see if you failed to properly pay use tax.


Action: Audit your fixed assets listing in the same way you make a physical count of your inventory. If you have not already done so, create asset tags and build a new fixed asset subledger. Remove any obsolete or sold/disposed assets from your balance sheet. Also consider documenting your fixed assets with a photo or video camera, and send copies to your insurance company for their records. Photos can also be a great way to document an equipment's serial number.

Keep Your Social Security Number Safe

  Identity thieves are very active right now

Countries and citizens around the world are banding together to defeat the coronavirus. While your attention is concentrated on protecting your family, friends and community, identity thieves are seeing an opportunity to swipe your confidential information.


Very few things in life create a higher degree of stress and hassle than having your Social Security Number (SSN) stolen, especially during a pandemic like we are now experiencing. This is because, unlike other forms of ID, the SSN is virtually permanent.


Replacing a stolen SSN is not only hard to do, it can create hardships. You will need to re-establish your credit history, re-assign your SSN benefits history, and realign your tax records. Your best defense is to stop the theft before it happens.

Here are some things that you can do to minimize the risk of this ever happening to you:
• Never carry your card. Place your SSN card in a safe place. This place is NEVER your wallet or purse. Only take the card with you when you need it, then return it immediately to your designated safe place.

• Know who needs it. As identity theft becomes more common, there are fewer people or organizations who really need to know your Social Security number. Here is a list of entities who still need your SSN:
o The government. Federal and state governments use this number to track your earnings for retirement benefits and to ensure you pay proper taxes.

o Your employer. The SSN is used to track your wages and withholdings. It is also used as proof of citizenship and to contribute to your Social Security and Medicare accounts.

o Certain financial institutions. Your SSN is used by various financial institutions to prove citizenship, open bank accounts, provide loans and establish other forms of credit.

• Know who really does not need it. Many other vendors may ask for your Social Security number, but having it is not an essential requirement. The most common requests come from health care providers and insurance companies. But the request for your number may come from anyone who wishes to collect an unpaid bill. When asked on a form for your number, leave it blank. Challenge the provider if it is requested.

• Destroy and distort. Shred any documents that have your SSN listed. When providing copies of your tax return to anyone, distort or cover your SSN. Remember your entire SSN could appear on the top of each page of Form 1040, although that is becoming less common. If the government requests your SSN on a check payment, only place the last four digits on the check, while pre-filling the first five digits with x's.

• Keep your scammer alert on high. Never give out your SSN over the phone or via e-mail. 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. Multiple businesses can provide you with your free credit report.

  March 2020
The tax filing deadline is right around the corner! As you're busy gathering your tax documents or reviewing your tax return, included here is a caution concerning the security of IRS online applications and websites.

If you're an independent contractor, there is an article outlining tips for surviving the world of self-employment.

This issue also includes an article on the pros and cons of renting or buying a home and an interesting article on new viewing alternatives targeting younger audiences.

Please call if you would like to discuss how this information could impact your situation. If you know someone who can benefit from this newsletter, feel free to send it to them.

This month:

March 16
-Due date for partnership and S corporation tax returns (Forms 1065, 1120S

Reminders
-Daylight saving time begins Sunday, March 8

The IRS Data Theft Problem
 Here's how to minimize your risk

What better place for online thieves to target than a database that contains 300 million+ Social Security numbers and a treasure trove of financial information?

The IRS has 52 Internet applications to help U.S. citizens comply with their tax obligations. But these online portals which collect, process and store large amounts of personal information and tax data, are also a potential gateway for online criminals and identity thieves.

While the IRS's electronic authentication security controls have been improved, the Treasury Inspector General recently said that the IRS's internet applications are not yet compliant with the National Institute of Standards and Technology guidelines.

Here's what you can do to protect your tax-related identity and information while the IRS tries to improve its security controls:
  • Use the IRS's Internet applications judiciously. Think you need to use one of the IRS's online applications? Consider requesting or obtaining certain information via the U.S. Postal service. Simply decide if you're willing to take a risk using an application that isn't compliant with the National Institute of Standards and Technology.
  • Get an IP PIN. An Identity Protection PIN (IP PIN) is a six-digit number that helps prevent filing fraudulent federal income tax returns. If you are a confirmed victim of identity theft, the IRS will mail you an IP PIN after the fraudulent tax issue has been identified. If you are not the victim of tax-related identity theft, you can voluntarily ask the IRS to issue you an IP PIN if you live in certain states. Additional states will be added until the IP PIN program is available nationwide.
  • Review your credit report once a year. Check your credit report for any unauthorized activity or errors. This periodic review can often be the earliest warning that your private information is compromised.

Live Streaming Entertainment
 is Changing!

If it’s between 9:30 am and 6 pm CST, a 28-year-old named Tyler Blevins—better known as Ninja—is most likely broadcasting himself playing video games. He’s also making an estimated $500,000 a month doing it.

Blevins represents the new wave of visual entertainment and video game streaming. His popularity started to soar in late 2017 when he and other video game streamers began playing a game called Fortnite. Fast forward to 2019, and Blevins is now the most recognized name in the video game streaming industry with nearly 15 million followers.

But it's not just Blevins and the video game streaming industry that are racking up huge audiences. The entire streaming industry is estimated to reach $125 billion by 2025, according to findings from Grand View Research.
Here are three of the most popular social media platforms that are currently dominating the live, visual entertainment market:
  • Twitch: Live game streaming                                            Twitch (purchased by Amazon in 2014 for $1 billion) is the most popular streaming (sharing live video) platform in the world and where Blevins first started growing his followers. It has 15 million daily active users and 27,000 partners-streamers who have met certain conditions to access more features and monetize their channels. Twitch is most associated with watching people play video games, but has everything from live educational streams to broadcasting events for eSports, an industry with revenues over $1 billion. While users are attracted to the service by individual gamers and the games they play, Twitch relies on an audience in the 18-34-year-old age range to patronize advertisers, make in-app purchases, and subscribe to premium services.
  • Mixer: Microsoft competitor to Twitch                      Purchased by Microsoft in 2016 for an undisclosed amount, Mixer is currently a distant 2nd to Twitch in the streaming space, but quickly gaining traction. Boasting a better overall gaming and watching experience than Twitch, Mixer was able to lure Blevins away from Twitch in 2019, signing him to a $50 million contract. Like Twitch, Mixer is banking on both establishment backing and being able to move traditional revenue streams into a new model.
  • Tik:Tok The lip-syncing video phenomena                    If video games aren't your thing, then maybe lip-synching with TikTok is worth a look. Backed by the Chinese company ByteDance, TikTok's app boasts 150+ million downloads across every major market in the world, a level of adoption only matched by the biggest names in tech. TikTok lets users create 15-second videos and share them, and then the platform uses advanced artificial intelligence (AI) to directly feed those videos to users it deems will enjoy them. This is different than apps which suggest content, as TikTok directly presents the content to users. Videos are often of individuals participating in viral dance trends or of short comedic skits. The AI behind the app is constantly learning from user videos and is able to better curate content.

Should You Buy or Rent a Home?

For many folks, the lyrics of a 1960s rock song summarize the American dream: "Our house is a very, very, very fine house." According to U.S. Census figures, about two-thirds of American families are homeowners. But buying a house or condo may not be the best choice for every family in every situation. The advantages of renting and owning a home are listed down below:
Renting Advantages
  • Greater flexibility. When renting a house, apartment, or condo, you have the option of moving at the end of the lease term. No need to contact a realtor, no hassle with buying or selling. For those who want to keep their options open, especially in terms of job location or dwelling size, renting may prove the better choice.
  • Opportunities to invest elsewhere. Instead of plowing your savings into a home, you might get a better return by contributing to mutual funds or other investments. Depending on the housing market in your city, the annual increase in your home's value may barely outpace inflation.
  • Lower costs. Apartments are often smaller than homes, so heating and cooling expenses tend to be lower. If you don't have a lawn, you won't incur the cost of water to keep it green. Roof leaking? Appliances on the blink? Call the landlord. Home repair and maintenance aren't normally your responsibilities.
Owning a Home Advantages
  • Greater flexibility. Ironically, homeowners enjoy certain freedoms denied to renters. If a homeowner wants to paint a wall or hang a picture, he or she doesn't answer to a landlord. Installing a doggy door isn't a problem. Hiring a remodel contractor to tear out a wall is perfectly acceptable. Don't try this if you're a renter.
  • Increasing equity. One of the greatest advantages to buying a home is the likelihood of increased equity over time. As long as your mortgage is being whittled down by monthly payments, you're building equity—even if your property value remains stable.
  • Lower taxes. The ability to deduct mortgage interest and property taxes (if you itemize) can significantly lower your end-of-year tax bill. Renters must forgo this benefit.

How to Succeed as an Independent Contractor

Are you one of the now 33% of Americans who work as either an independent contractor or freelancer?

If you answer yes, you are now a participant in the gig economy, a modern term for an economy characterized by workers who earn money through short-term contracts or freelance work.

Succeeding as an independent contractor can be challenging because it requires understanding a different set of key success factors than being a full-time employee. Here are some tips on developing your skill set as an independent contractor and where to turn to if you need help:
Remember that you are not alone. The complex nature of tax obligations for contractors can easily be navigated with professional help.
  • Contract for companies with generous payment terms. The time required for companies to pay its bills to contract workers varies from business to business. Investigate a company's policy for paying its contract workers to make sure it's what you're expecting. Remember, cash is king!
  • Market your services by creating an online portfolio. If being a contract worker is your full-time job, you’ll need to always be looking for your next gig. One great way to market yourself to prospective businesses is to create an online portfolio that showcases the work you can perform. You can choose to build a website using a do-it-yourself service or hire a developer to create a custom website.
  • Stick to a budget. As a full-time employee, you know the exact date you’ll receive your paycheck and usually the exact dollar amount. As a participant in the gig economy, however, you could earn a bunch of money in one month and hardly any money the following month. Prepare a financial budget so you can use income earned during your good months to cover costs during low income months.
  • Get advice from others. Working primarily by yourself can leave you isolated from fellow workers. Join a local group of self-employed workers that meets on a regular basis to network and learn what other workers are doing to be successful.
  February 2020
The 2019 tax filing season is in full swing. If you have not already done so, now is the time to collect your tax forms, organize your records and set a schedule to get your tax return completed.

Deep in the Form 1040 instructions is an annual recap of federal income and how the money is spent. Since most taxpayers no longer see these instructions, a recap of this information is provided here for your review.

Given late breaking tax laws, now is a good time to read a review of how newly passed retirement rules could help you save more. This issue also includes an article with several interesting facts about Valentine’s Day and for small business owners, some information is provided to help your employees navigate the new W-4 paycheck withholding form. 

Please call if you would like to discuss how this information could impact your situation. If you know someone who can benefit from this newsletter, feel free to send it to them.


This Month 

February 14
 - Valentine's Day

February 17
 - Presidents' Day

Reminders
 - Collect all tax forms (W-2s, 1099s, others)
 - Set up tax appointment
 - Rebalance investment portfolios


Finding the Balance of Income vs. Spending
The IRS primer every voter should know

Every year the IRS publishes instructions to prepare your Form 1040, individual tax return. The publication for 2019 is a whopping 108 pages! On page 103 of the IRS booklet is a summary of collections (income) and spending (outlays) by the federal government. Given the election year, here is a summary of this recap and some general observations.*


2018 Federal Income and Outlays
New Rules Mean Saving More for Retirement

The Setting Every Community Up for Retirement Enhancement Act, also known as the SECURE Act, was passed by Congress in late December, 2019. Here are some of the features in the new legislation that will help you save more for retirement:

Money can continue to grow tax deferred
If you turn 70½ in 2020 or later, you can keep money in a tax-deferred IRA or 401(k) for another 18 months to help the account continue growing before starting to withdraw funds. This retirement benefit is now available thanks to the required minimum distribution age being raised from 70½ to 72.

Action: Review your retirement account distribution needs and use this extra time to help make your distributions more tax efficient. For example, if you have $10,000 before you hit the next highest tax bracket, consider pulling more out of your retirement account. Or use the extra time to consider converting some funds to a Roth IRA.

Contribute to a traditional IRA at any age
While taxpayers have always been able to contribute to a Roth IRA at any age, 70½ was the cut-off for making contributions to a traditional IRA. You can now contribute to a traditional IRA at any age provided you have earned income.

Action: This is a great opportunity for retirees working part time to consider building their retirement nest egg.

Certain part-time workers can now contribute to 401(k) plans
Most part-time workers have never been eligible to participate in an employer’s 401(k) plan. The law now mandates employers which maintain a 401(k) plan to offer one to employees to worked more than 1,000 hours in one year, or 500 hours over 3 consecutive years.

Action: If interested in participating, contact your employer to determine if and when this option might be added to your company's retirement savings plan.

Use retirement funds to offset the costs of a new birth or adoption
Each parent can withdraw $5,000 out of their retirement account without the 10% penalty. The distribution, however, must still be reported as taxable income. The distribution can be repaid as a rollover contribution to an eligible defined contribution plan or IRA.

Action: If considering this alternative, make sure the withdrawal is within one year of the birth or adoption. Also retain records to prove the withdrawal is for a qualified event as how this is going to be administered is still up in the air.

Watch out for auto enrollment
The government thinks you should be saving more for retirement. So the new law allows a greater portion of your paycheck to be automatically transferred to an employer’s retirement plan. The maximum contribution that can now be automatically deferred into your employer’s 401(k) plan has increased from 10% to 15%.

Action: While saving more for retirement is a great idea, this automatic participation does not account for your particular situation. Be aware of this law and independently determine what you can afford to put towards retirement. Remember, you also need to build an emergency fund and pay your bills!

Valentine's Day - Did you know?
Saints, dogs and cash all play a role

Cupid, candy hearts, flowers and chocolates are common items associated with Valentine’s Day. According to the National Retail Federation, Americans now spend more than $20 billion lavishing gifts on their kids, friends and significant others.

But why?

Who decided a day in the middle of February is a time to celebrate love and spend a bunch of money on gifts? The actual story of how Valentine’s Day (and its symbols) got its wings, and how much Americans spend on gifts for Valentine's Day, might surprise you.

• It’s named after a Catholic saint. (We think.)
There are stories of three different Catholic saints named Valentine who were involved in various romantic shenanigans. The tales involve conducting outlawed marriages, a secret relationship with a jailer's daughter and a love letter ending in “from your Valentine.” Unfortunately, all three saints met a similar fate by being put to death by Caesar. How romantic! While it’s pretty clear Valentine's Day derives from one of these three saints, we just don’t know which one for sure.

• It may have started as a Pagan celebration.
Ancient Pagan festivals were often very unusual, and this one is no exception. Historians believe it involved goat and dog sacrifices, using their blood-stained animal hides, and having a drawing for a companion for the next year. It’s safe to say that everyone, especially your dog, is relieved this tradition fizzled out at some point.

• Its primary color, red, has scientific backing.
Giving flowers, especially red roses, has been a popular romantic gesture all the way back to the Saint Valentine era. Why red? It represents passion and desire. According to a study by the University of Rochester, science ties color to behavior. The study demonstrates that men find women wearing red attire more attractive.

• Americans spend an average of $162 on gifts.
While the percentage of Americans who celebrate Valentine's Day has declined over the past decade (63% of Americans celebrated the holiday in 2009 compared to 51% in 2019), those who do celebrate Valentine's Day spent an average of $162 on gifts in 2019 compared to $103 in 2009.
Knowing the history of Valentine’s Day and how the U.S. spends money on gifts for the special day certainly adds some intrigue to the holiday, but recreating the actual events is probably not a great idea. Instead, give your loved ones a hug, a simple treat and have a wonderful Valentine’s Day!

Setting up Your Business Accounting System

You've done the hard work. You have a new business idea or you've found an existing business to purchase. Want to help ensure your business success? Pay attention to correctly setting up your business' accounting system. Here's how:
  • Consider business entity. Choosing the right legal and tax entity for your business is important. Consult experts to discuss your options. On the tax side, sole proprietors use a Form 1040 Schedule C to report their activity, while other business entities such as S-Corporations and Partnerships file informational returns and pass-through profits to your individual tax return. C-Corporations require separate tax returns without pass-through of profits onto your personal tax return.
  • Determine if you'll use cash versus accrual basis. There are different approved methods of accounting. You will need to determine which is best for you. Sometimes your business dictates a required method, but not always. The basic difference lies in when you can book revenue and expense. One method (cash) is based upon when you actually receive or make payment. While the accrual method allows capturing this same information when there is an established obligation.
  • Separate your books. If starting a business from scratch, remember to set up separate bank accounts and recordkeeping. IRS auditors are quick to disallow expenses when your business expenses are mingled together with personal expenses. The same is true with credit cards. Use a separate credit card for your business transactions.
  • Use sub-ledgers. Well-run businesses understand the need to organize elements of their business into accounting categories. These categories often use their own reporting system called sub-ledgers. Common areas are sales, accounts receivable, accounts payable, fixed assets, and inventory.
  • Honor cash flow. Often success or failure of your business is predicated on whether you have enough cash to pay your bills. Determining your cash needs means understanding the cash situation of your business. To do this requires a good set of records. This includes recording your current situation on a timely basis and establishing a forecast of cash needs throughout the year.
  • Create a fortress balance sheet. Banks love a strong balance sheet. If you think your business may need money for expansion, you will want to focus on developing a strong balance sheet that is low in debt and high in liquid assets like cash and accounts receivable. The irony here is that it's easy to borrow money when your records show you don't need it and it's hard to borrow money when you do need the funds.
  • Identify financial pressure points. Every business has a few financial items that drive profitability. Do you know yours? It might be payroll in a labor-intensive business. It might be rent in a retail establishment. Perhaps your margins are low because of heavy promotional costs. A strong accounting system will help you stay focused on the more important financial elements of your business.
  • Understand seasonality. By setting up a good accounting system AND forecasting performance over a twelve-month period, you will understand the true needs of your business. This is especially important if your business is seasonal in nature.
Remember, by spending time setting up the accounting system that is right for you, you are increasing your business' chance for success.
New W-4 Creates Questions for Human Resources

With the major Form W-4 overhaul for 2020, you may field questions from your employees. While it’s not your responsibility to provide tax advice to your employees, it’s good to be prepared to help answer common questions about the new IRS form. Here is a summary of the W-4 changes and answers to some common questions you might encounter:

The change
Form W-4 was changed by the IRS in an attempt to make payroll withholdings more accurate and easier for employees to understand following the implementation of the Tax Cuts and Jobs Act. The new Form W-4 eliminates the sometimes confusing allowance system, replacing it with targeted questions, worksheets and fields for dependents, other income and anticipated deductions.
Gone are days of simply increasing or decreasing allowances to get the proper withholding — making a change now requires some tax forecasting.

5 common questions about the new Form W-4

1. Do I have to submit a new form?
No. The allowances an employee has on a previous Form W-4 will continue to calculate appropriately in 2020. If changing jobs or an employee wishes to adjust withholdings, completing the new W-4 is required.

2. Are ALL steps on the new W-4 required to be filled?
No. Step 1 (personal information) and step 5 (your signature) are the only required sections to complete. If your employee only completes steps 1 and 5, a withholding will be calculated under the assumption that he/she is only taking the standard deduction. If your employee has dependents or wishes to make other withholding adjustments they will need to fill out other steps in the form.

3. Do employees have to complete all the worksheets?
No. However the worksheets are intended to provide a more accurate withholding amount. If an employee has multiple jobs or itemizes deductions, the worksheets will help the payroll department withhold the proper amount from a paycheck while accounting for these other factors.

4. Will completing the new W-4 affect refunds?
If an employee has the exact same tax situation (income, deductions and credits) in 2020 as they did in 2019, the tax calculation should have minimal impact on the tax refunded or owed. If there is a need to adjust withholdings at any time during 2020, however, the anticipated refund might look a lot different if an employee does not take the time to carefully complete the new Form W-4.

5. Should an employee adjust their withholdings?
This, of course, is up to the employee. It is best to coach them to speak to their tax advisor. But let them know that it really depends on them. If they want to maximize monthly cash flow or wish to receive a larger refund, then they need to go through the W-4 exercise. While more complicated, per the IRS this new form allows for less guessing when it comes to forecasting their April tax bill. A simple tax forecast that factors in last year’s tax situation and accounts for changes in the current year will provide clarity to the amount that needs to be withheld.

Remember, to avoid an underpayment tax penalty an employee must withhold 100% of last years tax bill or 90% of this year's tax bill. This moves to 110% of last year's bill if income is over $150,000 ($75,000 if married filing separate). Finally, coach your employees to double check their paycheck after any change, it is never fun to be surprised by a big tax bill because withholdings are too low.

It is best to use last year's tax return PLUS a tax organizer to ensure you have all the proper records needed to accurately prepare your tax return. The organizer is especially helpful as there are a list of questions to help you jog your memory to recall certain events that have taken place over the past year that might have a tax consequence. If in doubt, save the documentation, proof of payment and any receipts!

You NEED These Documents to File Your Taxes!

It’s easy to get inundated with documents during tax season. You can receive documents from many different organizations, including employers, financial institutions and others. Many documents are now also being sent via e-mail, which increases the likelihood it could get lost in your inbox.

As tax season is quickly approaching, here are some of the documents to be on the lookout for:

W-2s
While W-2s are the most widespread and well-known tax form, it can be easy to lose track of W-2s if you or your spouse have multiple jobs. Keep track of each employer to ensure you receive the forms in time.

1099-INTs and 1099-DIVs
Most of us receive small interest or dividend payments throughout the year. These payments are reported on a Form 1099 and must be included on your Form 1040. Depending on the type of investments, there could be numerous 1099s to report this interest and dividend income. Make a list from last year's tax return to help keep track of these 1099s as they arrive via mail or e-mail.

1099-Rs
Form 1099-R is used when a distribution is made from a pension or retirement account. You could receive a 1099-R if your employer was part of a recent merger, and the company which was acquired rolled its retirement funds into the new company’s plan. You could also receive a 1099-R if you get a new job and you roll your existing retirement funds into your new company’s plan.

Get Organized
You will also need any documents that confirm and support any deductions you plan to take. For instance, you may need documentation to claim deductions for day care expenses, educational expenses (form 1098-T), mortgage interest documentation (form 1098), proof of medical, dental and vision care, charitable contributions, business records, property taxes, state taxes and much more.

As always, should you have any questions or concerns regarding your tax situation please feel free to call.
  January 2020

Welcome 2020! A new year calls for a fresh look at your financial strategies. Consider how to make the most of your savings accounts - and don't forget you still have time to fund your IRA! You can also try the following fail-proof tricks to keep your New Year's resolutions on track.

Call if you would like to discuss how this information relates to you.



This Month 

January 1
     - New Year's Day!!
January 15
     -4th Quarter Estimated Payments Due
January 20
     -Martin Luther King Jr. Day

Start tax planning for the new year: 
     -Adjust withholdings
     -Organize filing records
     -Schedule Tax consultation
     -Rebalance investment portfolio

Make Your Cash Worth More
Banking Tips to Help You Cash in

Your cash is parked. Do you know if it's making or losing you money? For instance, letting it sit in a non-interest-bearing account is a waste of earnings potential. It’s actually losing money if you factor in inflation! Here are some ideas to help you make the most of your banked cash:

1. Understand your bank accounts. Not all bank accounts are created equal. Interest rates, monthly fees, minimum balances, direct deposit requirements, access to ATMs, other fees and customer service all vary from bank to bank and need to be considered. Start by digging into the details of your accounts. There may be some things you’ve been unnecessarily living with like ATM fees or monthly account charges. Once you have a handle on your current bank, conduct research on what other banks have to offer.

2. Know your interest rates. As a general rule, the more liquid an account, the lower the interest rate. Checking accounts offer the lowest rates, then savings accounts, which yield lower rates than CDs. Maximizing your earnings is as simple as keeping your cash in accounts with higher interest rates. The overall interest rate earned between all your accounts should be higher than the inflation rate, which is generally around 2 percent.


3. Make smart moves. There are a couple of things to take into account when making transfers. First, federal law allows for only six transfers from savings and money market accounts per month. Second, if you invest in longer term investments like CDs or bonds, there are penalties for withdrawing funds before the maturity date. So make sure you can live without the funds for the duration of the term.

4. Stay diligent. Putting together a cash plan is just the start. The key to success is to be persistent. Besides losing out on potential earnings, mismanaging your cash can result in hefty overdraft fees. The more attention you devote, the more your money will grow.

There's Still Time to Fund Your IRA

There is still time to make a contribution to a traditional IRA or Roth IRA for the 2019 tax year. The annual contribution limit is $6,000 or $7,000 if you are age 50 or over.
Prior to making a contribution, if you (or your spouse) are an active participant in an employer's qualified retirement plan (a 401(k), for example), you will need to make sure your modified adjusted gross income (MAGI) does not exceed certain thresholds. There are also income limits to qualify to make Roth IRA contributions.

Maximum 2019 IRA Contribution amounts: $6,000 or $7,000 (with age 50+ catch-up provision)


2019 IRA Income (MAGI) Limits
Note: Married traditional IRA limits depend on whether either you, your spouse or both of you participate in a qualified employer-provided retirement plan. If married filing separate and either spouse participates in an employer's qualified plan, the income phaseout to contribute is $0-10,000.

If your income is too high to take advantage of these IRAs you can always make a non-deductible contribution to an IRA. While the contributions are not tax-deferred, the earnings are not taxed until they are withdrawn.

2020 Retirement Plan Limits

As part of your 2020 planning, now is the time to review funding your retirement accounts. By establishing your contribution goals at the beginning of each year, the financial impact of saving for your future should be more manageable. Here are annual contribution limits:
Take action

If you have not already done so, please consider:

  • Reviewing and adjusting your periodic contributions to your retirement savings accounts to take full advantage of the tax advantaged limits
  • Setting up new accounts for a spouse or dependent(s)
  • Using this time to review the status of your retirement plan
  • Reviewing contributions to other tax-advantaged plans including flexible spending accounts and health savings accounts

Fail-Proof Your New Year's Resolutions

New Year’s resolutions get a bad rap — and for good reason. They are wildly unsuccessful. Millions of people have well-intentioned aspirations for the new year, but only about one in 10 actually accomplish their goal, according to the Statistic Brain Research Center.


If you dig a little deeper into the reasons why they fail, you find it’s usually not the resolution itself, it’s in the execution. Here are four popular New Year’s resolutions and how to avoid messing them up:

List of Services

Resolutions, whether at New Year’s or any other time, are a good thing. To be successful, more planning and attention are required than most people think. And if you slip up, don’t quit! Learn from your mistakes and keeping going.

As always, should you have any questions or concerns regarding your tax situation please feel free to call.
  December 2019

It's almost the New Year! Have you done your yearly credit report checkup yet? While you're at it, protect yourself from charity scams this season by reviewing some big red flags and learn how to prioritize cash flow in your business.

Call if you would like to discuss how this information relates to you. If you know someone who can benefit from this newsletter, feel free to send it to them.



New Year Countdown

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Days
Hours
Minutes
Seconds

HAPPY NEW YEAR!!

This Month 

December 22
     - Hanukkah begins
December 25
     -ChristmasDay!!
December 26
     -Kwanzaa begins
January 15
    -4th Quarter Estimated Payments Due

Take final year-end actions:
    -Deductible gifts
     -Capital gains/losses
     -Charitable giving
     -Dividend income

Time for a Yearly Credit Report
One way to head off fraud during tax season is to get your free annual credit report now. Credit reports often have errors in them; this quick checkup can be the first indication that some form of identity theft has taken place on your account.

The good news is that each of the major consumer credit reporting agencies is required by law to provide you with a free report once a year. Here's contact information to help you get your free credit report:
Annual Credit Report.com
Telephone: 1-877-322-8228
Via mail: (fill out the online form and mail it to the following address)
Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281

Listed here are the three major credit agencies and how to contact them directly.


TransUnion
Telephone: 833-395-6938
Via mail: 2 Baldwin Place
P.O. Box 2000
Chester, PA 19022

Equifax
Telephone: 1-800-685-1111
Web site: www.equifax.com
Via mail: Equifax Credit Information Service
P.O. Box 740241
Atlanta, GA 30374-0241

Experian
Telephone: 1.888.EXPERIAN (397-3742)
Via mail: P.O. Box 9701
Allen, TX 75013
Reminder: Each agency may try to upsell you into additional paid services. If you find problems on your credit report, work through the credit bureau's process to correct the error. Also place fraud alerts on your credit agency account if you experience any kind of identity fraud.
3 Major Charity Scam Red Flags

You’ve probably already received several letters and phone calls from charities asking for donations. Most requests are from legitimate organizations. Some, however, are bogus charities set up by con artists who use the holiday spirit to their financial advantage.


Last year, Americans gave nearly $428 billion to charities, according to Giving USA 2019: The Annual Report on Philanthropy for the Year 2018. That's a huge incentive for fraud.


If you're planning to donate, take some time to learn how to spot a charity scam. Here are a few big red flags:


  • Popup charities. Every legitimate charitable association started sometime, and some are still being formed. But natural disasters, endemics and calamities of every type — from Hurricane Dorian to the Ebola virus — seem to spawn an inordinate share of fake charities. You can avoid these popup scams by donating to charities that you trust, which generally means those with a proven track record. If you're unsure, check out the organization with the Better Business Bureau, Charity Navigator, GuideStar or similar watchdog group.
  • Evasive answers to fundraising questions. A legitimate caller should be upfront about their charity, the percentage of funds allocated to administration and marketing, and what target groups will be aided by your donation. Whether you're giving to provide medical supplies, support research or some other worthy cause, don't be afraid to ask direct questions and expect direct answers. If the fundraiser seems to hedge their responses or knows little about the supposed cause to which you're contributing, consider a different charity. Beware of vague claims like "educating the public" or "promoting awareness."                             
  • Urgent email requests. Websites made to mimic legitimate charities have conned many otherwise careful contributors. Emails asking for money on a deadline may originate from the backroom computer of a scam artist. Never divulge your financial information via email. Call the charity directly and find out if it's registered in your state (if required). Ask for written information. When in doubt, check it out.

Many charitable organizations are seeking your aid to address genuine hardships. Avoid the schemes of unethical scammers, and your donations will provide help where it's needed most.


If you think you’ve been contacted by a bogus charity, let the Federal Trade Commission know by filing a complaint.
Cash Flow: A Central Part of Your Business Plan
When tracking and planning your business objectives, it’s easy to focus your analysis on two reports — the income statement and balance sheet. But one of the primary keys to your business’s success relies more on how you handle the money flowing in and out of the business. The appearance of a solid profit can hide a lurking cash flow problem.

Here are practices to help you give your cash flow the attention it deserves:
Understand your cash position. Start with simply getting in the habit of monitoring your bank account activity daily to watch for mistakes or unforeseen charges. Then look at each business process that involves cash — purchasing, inventory, collections and payroll are good examples. Consider extending terms for paying vendors, establishing shorter terms for customers to pay and implementing a review process to ensure accurate payroll calculations. Also explore opportunities to turn over your inventory faster.
Create a cash flow statement forecast. With your knowledge of cash, create a forward-looking statement of monthly cash flow. It will reflect the ebbs and flow of cash throughout the year and identify times of cash crunch. You can then see the impact of changes you are making on your company's cash position.

Identify relevant ratios. There are many helpful cash flow ratios. Identify ratios that are especially helpful to your business. Have debt? Consider the cash flow coverage ratio (operating cash flow ÷ by debt) to help plan for scheduled debt payments. Making a lot of capital purchases? Use the free cash flow calculation (operating cash flow – capital expenditures) to determine how much cash will be left over after the purchases.

Build in some contingencies. Most businesses experience seasonality. Understanding your business cycles can help you strategically manage cash in high cash months to cover shortfalls that come in low cash months. Set up a line of credit so it’s available in the case of an emergency, or as a bridge during short-term liquidity needs. A line of credit only charges interest only when used, so it’s a perfect tool to have at your disposal.

Watch for hidden cash hijackers. Oftentimes, large cash expenditures can be hidden on your income statement or balance sheet. A few examples are payments on capital purchases, debt obligations, dividends, guaranteed payments to partners and taxes. Income taxes, when not accounted for correctly, can cause a twofold problem — a large lump sum that is due in a short amount of time, plus a larger obligation to account for going forward. Don’t wait until the end of the year to project your tax provision.

Appoint someone to manage cash. As with many business processes, important details can fall through the cracks if there is not clear accountability as to who is responsible for the task. So assign yourself or someone you trust to manage the company’s cash flow.

When businesses fail, it’s usually because they run out of money. By making cash flow a central part of your business plan, you greatly reduce this risk.
Winter Wonderland Trivia
Whether or not you hear sleigh bells ringing, winter wonderland is here! Here’s a quiz to test your wintertime wisdom and offer you fun facts to impress your family and friends.

What is the largest 24-hour snowfall ever measured in the U.S.?

A. 4 feet
B. 6 feet
C. 10 feet
D. 13 feet

Answer: B. 6 feet.  It’s 6.3 feet to be exact. This amount fell in a 24-hour period in Silver Lake, Colorado on April 14-15, 1921, according to The Weather Channel. It probably had something to do with its 10,220-foot elevation in the Colorado Rockies!

Krampus, the horned half-goat, half-demon creature from Central European folklore, is known for what during the holiday season?

A. Bringing fruitcake to families
B. Singing Good King Wenceslas while caroling 
C. Seeking out children who have misbehaved
D. Stealing wooden shoes

Answer: C. Seeking out children who have misbehaved. This made-up figure seems to be pretty mischievous himself! During an Austrian Krampuslauf (Krampus Run), herds of Krampuses — people dressed in masks and costumes — stomp down streets and play tricks on parade goers.

Which sport was incorporated into the Winter Olympics?

A. Snow tubing
B. Speed skiing
C. Bandy
D. Ski ballet

Answer: D. Ski ballet. Called figure skating on snow with skis, this sport was a demonstration event in the 1988 Calgary games and the 1992 Winter Olympics in Albertville, France. 

Which animal hibernates the longest?

A. Bumblebee
B. Alpine marmot
C. Bear
D. Wood frog

Answer: D. Wood frog. This bug-eyed amphibian can survive up to seven months in a “deep-freeze” period! They can live while being completely frozen by protecting their cells using glucose, according to a study published in the Journal of Experimental Biology.

How many people were part of the largest gathering of holiday sweater-wearers?

A. 3,473
B. 1,201
C. 6,552
D. 992

Answer: A. 3,473. That’s a lot of ugly sweaters! According to Guinness Book of World Records, this goal was achieved by Kansas Athletics at a Kansas University men’s basketball game against Montana in December 2015.

As you enjoy the season, spread some of these fun wintertime facts with your loved ones.

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

  November 2019
2020  is coming quick - are you prepared? Take stock now and learn about the year-end moves that'll help you save. Plus, consider how the 2020 Social Security changes will affect your plans. And make sure you're hitting the employment tax deadlines.

Call if you would like to discuss how this information relates to you. If you know someone who can benefit from this newsletter, feel free to send it to them.



This Month 

November 11
     - Veterans Day
November 28
     -Thanksgiving!!
November 29
     -Black Friday!

Save Money with These    Year-End Ideas

There's still time to reduce your potential tax obligation and save money this year (and next). Here are some ideas to consider:

• Estimate your 2019 and 2020 taxable income. With these estimates you can determine which year receives the greatest benefit from a reduction in income. By understanding what the tax rate will be for your next dollar earned, you can understand the tax benefit of reducing income this year AND next year.

• Fund tax-deferred retirement accounts. An easy way to reduce your taxable income is to fully fund retirement accounts that have tax-deferred status. The most common accounts are 401(k)s, 403(b)s and various IRAs (traditional, SEP and SIMPLE).

• Take your required minimum distributions (RMDs). If you are 70½ or older, you need to take required RMDs from your retirement accounts by Dec. 31. Don't forget to make all RMDs because the fines are hefty if you don't — 50 percent of the amount you should have withdrawn.

Keep in mind, even if you don't have RMDs yet, removing a planned amount from your retirement accounts each year may be more tax efficient than waiting until you are required to do so.

• Manage your gains and losses. Rebalance your investment portfolio, and take any final investment gains and losses. When you have more losses than gains, up to $3,000 can be used to reduce your ordinary income. With careful planning, you can take advantage of this loss amount each year.

• Finalize your gift-giving strategy. Each year you may gift up to $15,000 without tax reporting consequences to as many individuals as you choose. Consider any gift-giving you wish to make up to the annual limit. This could include gifts of cash or property, and investments.



• Donate to charities. Consider making end-of-year donations to eligible charities. Donations of property in good or better condition and your charitable mileage are also deductible. Receiving proper documentation that acknowledges your contributions is important to ensure you obtain the full deduction. Have a plan by knowing your total deductions for the year to help you decide how much and when to donate. Pulling some donations planned for 2020 into 2019 may be a good strategy.

• Review your automated billing transactions. This is a good time to identify what automatic monthly expenses should be reviewed for reduction or elimination. You may also discover billing for services you thought were canceled. This specific review often catches errors that a simple account reconciliation may be missing.

• Organize records now. Start collecting and organizing your tax records to avoid the scramble come tax season.

• Develop your own list. Use these ideas as a jumping off point to create your own list of annual review items. It might also include reviewing college savings accounts, beneficiaries, insurance needs, wills, and going through an aging parent's financial accounts.
The Power of Cultivating Gratitude
Tips on how to be thankful
It costs nothing to say thank you. Yet cultivating gratitude in your life may be one of the most rewarding moves you can make. Not only does it invoke warm fuzzies in everyone involved, expressing your appreciation may actually improve your health and well-being.

A landmark study by gratitude researcher Robert A. Emmons has shown that gratitude can reduce physical illness symptoms and toxic emotions. It can even help you sleep better and longer, according to a study published in Applied Psychology: Health and Well-Being.
So what are some ways you can make gratitude part of your everyday life? Here are a few tips to help you get started:

• Write it out. Write out what you’re thankful for in your life. This may mean making a nightly habit of writing in a journal or jotting down a message to a loved one and giving it to them. You could also make some sticky note reminders of what you’re grateful for and hang them on your mirror to read each morning.

• Share a good memory. Reminiscing often stirs up feelings of gratitude. For instance, think about the time you first met a close friend in grade school. Contact them and tell them how grateful you are that it happened. Send a photo of that family vacation when you all shared a common experience like learning to water ski. When you think about it, you will quickly discover happy memories to share with loved ones.

• Offer your service. Show your gratitude through your actions. If you appreciate your community, join a group to clean up the park and streets. Provide a positive online review for your favorite local café. Or volunteer at a Veterans Affairs hospital.

• Lend an ear. Some of the most meaningful moments involve simply being heard. Return the favor. If your sister is usually the one who lets you ramble on about work grievances and family drama, it’s time to give her a turn. Let her know you’re there and ready to listen. Maybe you avoid your chatty (albeit helpful) coworker. When you see them next, give them 5 minutes of your time.

• Pay it forward. Did your neighbor share a gutter-cleaning hack with you? Next time you see someone on your street cleaning their gutters, offer to lend a hand. See a mom digging for spare change at a check out register? Pay it for her. Let the appreciation of your good deed change someone else’s outlook for the day. When they offer to pay you back, just tell them to pay it forward.

There are opportunities to cultivate gratitude all around us. Refocusing on what you appreciate on regular basis can help you live a healthier, more satisfying life.
  October 2019
Autumn's in full swing, meaning it's time to start preparing for the busy months ahead. You can get ready by learning about the Form 1040 updates you'll see this 2019 tax season, as well as the new Marketplace Facilitator sales tax laws for anyone that sells through Amazon or eBay. You can also brush up on your rights if a bill collector ever harasses you.

Call if you would like to discuss how this information relates to you. If you know someone who can benefit from this newsletter, feel free to send it to them.



This Month 

October 1
     - Simple IRA Plan Establishment Due
October 15
     - Deadline for Extended Individual and C-corp. 
        Tax Returns
October 31
     - Halloween!!

Another Year, 
Another New 1040

In 2018, the government attempted to “simplify” the tax-filing process by drastically shortening Form 1040. The result was six new schedules that created a lot of confusion. Now the IRS is attempting to ease some of that pain by revising the form and removing some schedules. Will it help? Here is what you need to know:

• More information on the main form. To make it easier for the IRS to match pertinent information across related tax returns, new fields have been added on the main Form 1040. For example, there’s now a spot for your spouse’s name if you choose the married filing separate status. In addition, there's a separate line for IRA distributions to more clearly differentiate retirement income.

• 3 schedules are gone. What was your favorite memory of Schedules 4, 5 and 6? Was it the unreported Social Security tax on Schedule 4? Or the credit for federal fuels on Schedule 5? While those schedules will no longer exist, those lines (and many others) have found a new home on one of the first three schedules. Less paperwork, but still the same amount of information.

• You can keep your pennies! For the first time, the IRS is eliminating the decimal spaces for all fields. While reporting round numbers has been common practice, it’s now required.

• Additional changes on the way. The current versions of Form 1040 and Schedules 1, 2 and 3 are in draft form and awaiting comments on the changes. Because of the importance of the 1040, the IRS is expecting to make at least a few updates in the coming weeks (or months) before they consider it final. Stay tuned for more developments.



How to prepare for the changes

The best way to prepare is to be aware that 1040 changes are coming. The information required to file your taxes will remain the same, but some additional hunting will be necessary to find the shifting lines and fields on the modified form.

Remember, changes bring uncertainty and potential for delays, so getting your tax documents organized as early as possible will be key for a timely tax-filing process.

Bill collector calling? Know your rights

Maybe you're behind on paying your bills because of circumstances outside of your control. Or perhaps there's been an error in billing. Either way, these scenarios may lead to a run-in with a debt collector. Fortunately, there are strict rules in place that forbid any kind of collector harassment in the U.S. If you know your rights, you can deal with debt collection with minimal hassle. Here's what to remember:

• You have a right to details — without harassment. When a debt collector calls, they must be transparent about who they are. They need to tell you: "This is an attempt to collect a debt, and any information obtained will be used for that purpose."
In addition, debt collectors cannot use abusive language, or threaten you with fines or jail time. The most a debt collector can truthfully threaten you with is that failure to pay will harm your credit rating, or that they may sue you in a civil court to extract payment.

• You don't have to put up with 24/7 calls. Debt collectors may not contact you outside of "normal" hours, which are between 8 a.m. and 9 p.m. local time. They may try to call you at work, but they must stop if you tell them that you cannot receive calls there.
Keep in mind that debt collectors may not talk to anyone else about your debt (other than your attorney, if you have one). They may try contacting other people, such as relatives, neighbors or employers, but it must be solely for the purpose of trying to find out your phone number, address or where you work.

• You can tell them to stop. Whether you dispute the debt or not, at any time you can send a "cease letter" to the collection agency telling them to stop making contact. You don't need to provide a specific reason. They will have to stop contact after this point, though they may still decide to pursue legal options in civil court.

• You can dispute collection. If you believe the debt is in error in whole or in part, you can send a dispute letter to the collection agency within 30 days of first contact. Ask the collector for their mailing address and let them know you are filing a dispute. They will have to cease all collection activities until they send you legal documentation verifying the debt.

If a debt collection agency is not following these rules, report them. Start with your state's attorney general office, and consider filing a complaint with the U.S. Federal Trade Commission and the Consumer Financial Protection Bureau, as well.


Amazon and eBay Sales Tax ALERT!

If you or your business sells product on Amazon using the Fulfillment by Amazon (FBA) service, you are well into the multi-state sales tax mess ... even if you are not aware of it. You may be asking yourself:

• Do I now need to register my business with every state and collect tax on their behalf?
• Do I really have physical nexus? What about economic nexus? What is nexus?

Background

The old sales tax standard required you to collect and remit sales tax only in states that you have a physical presence (also known as physical nexus). The recent South Dakota vs. Wayfair, Inc. decision by the Supreme Court then legitimized the concept of economic nexus. This means your business could be required to collect and remit sales tax based on where you ship a product and not whether you ever set foot in a particular state (economic nexus).

The bigger mess

States were quick to jump on the bandwagon and actively identify Amazon, Ebay and Walmart sellers to demand sales tax for website sales. Some states, like California, got even more aggressive and decided that FBA sellers actually have physical presence because Amazon may put your product in a warehouse in their state. They got seller lists from Amazon and sent out threatening letters to small sellers demanding back sales tax, even though businesses have no way to retroactively collect the tax because the customers are Amazon customers.





Marketplace facilitator to the rescue?

To help address this mess and alleviate the need for small businesses to collect and remit sales tax forms to 50 states, many states acknowledged the problem and have passed what is called Marketplace Facilitator laws.

In short, it’s on the facilitator, NOT you. States with these laws require Amazon, Ebay and similar companies that facilitate sales for resellers to collect and remit sales tax on reseller Amazon activity. There are more than 30 states that have adapted these laws.

You DO NOT need to register your business to collect sales tax in states that have Market Facilitator legislation unless you are otherwise required to do so.

Marketplace facilitator to the rescue?

• Know the states. Know which states have Marketplace Facilitator laws. If you don’t, you could unwittingly register your business with a state when you do not have to do so.

• Some states deploy deceptive tactics. For example, California passed a Marketplace Facilitator law effective October 2019. Despite this law, the California Department of Tax and Fee Administration (CDTFA) is actively soliciting (threatening?) small businesses who sell on Amazon to register and remit sales taxes for a time period prior to this date without disclosing the new law. To make matters worse, their sales tax registration form could make you personally liable for business-related sales tax and disclose your confidential supplier list. It may also be filled with other legal entrapments.

• Know the minimums. Even states without Marketplace Facilitator laws typically have minimum thresholds before they require you to collect and remit sales tax. Every state is different, but the typical limit is 200 transactions or $20,000 in sales.

• Check out streamline states. Collecting and remitting sales tax is a daunting task for any small business. Using a third party sales tax administrator is very expensive. There is some help, albeit still complicated, for registering with 23 states that are part of a streamline sales tax agreement.

Sales tax collection in multiple states is not for the faint of heart. Streamline Sales Tax and Bill Track 50 are a few of the popular sites that can help.



Decoding the New Dating Scene

Are you feeling a little in the dark about the new vocabulary developing around dating? It’s not surprising, especially when you hear a term like getting "ghosted."

Luckily, you’re just a few dating slang definitions away from having a better understanding of this vocabulary — often used on social media. It's important to understand, especially if you have young people in your life who are dating.

Here are a few popular slang terms and their definitions, plus conversation-starter ideas for when you encounter them:

• Breadcrumbing
Also known as stringing someone along. When someone offers just enough attention to another person to maintain hope there will be a relationship someday. Some examples include sending occasional texts and in-person flirting.

Conversation starter: Breadcrumbing can happen before a relationship begins, although sometimes a concrete relationship never    forms. This could just be flirting, but there may also be a more serious reason a relationship isn’t starting. Ask your teen how they’re feeling about the person they like, and if there are issues around starting a relationship with them.

• Instagrandstanding
Creating Instagram posts meant to capture the attention of a specific person. This includes posting photos from certain locations the person has a history of visiting, and providing references to music, food or clothing the person is known to favor.
Conversation starter: Has your child started exclusively posting on Instagram about South America after their new classmate just moved from Ecuador? Sounds like they’re Instagrandstanding. Ask them about their interest in the classmate.

• Love bombing
Communicating strong affection for someone at an early stage in a relationship. This is often considered a dating faux pas, and may be a manipulation tactic. For instance, going on a first date with someone and then confessing a desire to marry them the next day.

Conversation starter: If your teen is dealing with love bombing fallout, talk to them about their actions and how it affected their       relationship. This would be a good time to discuss appropriate levels of showing affection and why it’s sometimes challenging to manage. Discuss how love bombing can also be used to negatively control a relationship.

• Ghosting
Stopping all communication for no apparent reason or explanation. This means no more calls, texts, emails, social media messaging or in-person meetings. If someone ghosts you, they will not respond to any of your attempts to communicate with them, and will sometimes actively block you on social apps.

Conversation starter: Ghosting can feel especially harsh to someone who didn’t suspect there was a problem with a relationship. If  your teen has been ghosted, ask them how they are feeling and let them know there may not be a logical reason it happened. If you find out your child has ghosted someone, ask them why. Talk to them about better ways to handle ending a difficult relationship.

• Catfishing
Creating a totally bogus identity online and using it to manipulate someone to provide money or other favors. Catfishing is deceptive, as well as dangerous and illegal when used to steal identities. It can be a form of digital bullying. In the dating world, someone might catfish to hide their identity out of shame or embarrassment regarding their physical appearance, social status, age, gender or other traits.

Conversation starter: If someone has been catfished, get details about whom they thought they were talking to and what kind of information they shared. If you find someone is catfishing others, tell them to stop immediately. It is wrong and may need to be reported to the victim and the proper authorities.

Use these conversation starters to start a meaningful dialogue and ultimately promote trust and open conversations with your kids.


  September 2019
Welcome, fall! Pumpkin spice lattes aren’t the only thing you should be focusing on this season. Keep your tax plan in mind as you get closer to the end of the year. In this issue you’ll find articles to help you do so, including tips on what to do if you get an IRS letter in the mail. There’s also advice for a list of ways to help older adults avoid scams. And a few key reasons why you should never skip the fine print when agreeing to terms and conditions.

Call if you would like to discuss how this information relates to you. If you know someone who can benefit from this newsletter, feel free to send it to them.

This Month 

September 2 
     - Labor Day
September 16 
     - 3rd quarter estimated tax due
     - Filing deadline for 2018 S corp and partnership              returns that received extension
October 1
     - SIMPLE IRA plan establishment due

The IRS Is Not Always Right
A letter in the mailbox with the IRS as the return address is sure to raise your blood pressure. Here are some tips for handling the situation if this happens to you:
  •  Stay calm. Try not to overreact to the correspondence. They are often in error. This is easier said than done, but remember the IRS sends out millions of notices each year. The vast majority of them correct simple oversights or common filing errors.
  • Open the envelope. You would be surprised at how often people are so stressed by receiving a letter from the IRS that they cannot bear to open the envelope. If you fall into this category, try to remember that the first step in making the problem go away is to simply open the correspondence.
  • Carefully review the letter. Understand exactly what the IRS thinks needs to be changed and determine whether or not you agree with its findings. Unfortunately, the IRS rarely sends correspondence to correct an oversight in your favor, but its assessment of your situation is often wrong.
  • Respond timely. The correspondence should be very clear about what action the IRS believes you should take and within what timeframe. Delays in responses could generate penalties and additional interest payments.
  • Get help. You are not alone. Getting assistance from someone who deals with this all the time makes going through the process much smoother.
  • Correct the IRS error. Once the problem is understood, a clearly written response with copies of documentation will cure most of these IRS correspondence errors. Often the error is due to the inability of the IRS computers to conduct a simple reporting match. Pointing the information out on your tax return might be all it takes to solve the problem.



  • Use certified mail. Any responses to the IRS should be sent via certified mail. This will provide proof of your timely correspondence. Lost mail can lead to delays, penalties and additional interest on your tax bill.
  • Don't assume it will go away. Until a definitive confirmation that the problem has been resolved is received, you need to assume the IRS still thinks you owe the money. If no correspondence confirming the correction is received, a written follow-up will be required.

Help Older Adults Stand Up Against Scams
The Consumer Financial Protection Bureau recently reported in financial exploitation cases that older adults lost an average of $34,200. Unfortunately, these funds are often never recovered. You can ensure this doesn't happen by learning more about scams and how to protect yourself. Here are some tips:

• Recognize the scams.The best way to protect yourself from a scam is to understand what they look and sound like. Here are a few key elements to look for when identifying a scam: Did you know? IRS impersonation scams are the No. 1 scam targeting older adults, according to the Treasury Inspector General for Tax Administration, with more than 2.4 million Americans targeted.

o You are promised a great offer or benefits
o You are forced to make quick decisions
o You are pressured to provide financial and/or personal information
o You are threatened

• Know why you are a target. You and other older adults may be targeted because you own a home, and have retirement savings and exceptional credit — a treasure trove for con artists to pillage. Scammers take advantage of trusting older adults because they’re less likely to say no and sometimes have cognitive issues that affect decision-making skills. In other cases, family members and non-related caregivers may have easier access to their funds, making them more susceptible to theft.

• Keep your personal and financial information safe. Keep your bank information, Social Security card and other finances stored somewhere secure in your home. Think twice about what you are sharing on Facebook, and don’t give out your Social Security or account numbers without vetting the person or company asking you for it. Con artists find useful information on social media sites about your family members and then pretend to be a relative who asks for money, or they could directly ask you for sensitive information over the phone or via email.

• Hang up if you feel uncomfortable. Don’t worry about being impolite if someone on the phone is pressuring you into sharing sensitive information. Hang up. If the call comes from a company you trust, you can call back and ask for the department that handles your account to determine if the call is for a legitimate reason.

• Turn down unsolicited offers. If you receive a call or an in-person visit from someone you don’t know selling you a product or service you didn’t request, turn it down or tell them you’ll decide at a later time. If the service or product interests you, conduct independent research on three suppliers. Proactively contact all three and determine the best offer. Include a trusted family member in the decision-making process. Doing this can effectively eliminate most scams.

• Use direct deposit. You can avoid having your checks stolen when you arrange for your checks to be directly deposited into your bank account. Ask your bank to show you how.

• Speak up if you think you’re a scam victim. There’s no need to feel embarrassed or ashamed if you think you’ve been scammed. Instead, let people know right away.

o Call your bank and/or credit card companies.
o Reset your account passwords.
o Call the police to report stolen property.
o Submit a consumer complaint using the FTC consumer Complaint Assistant.
o Report the scam by calling the United States Senate Special Committee on Aging Fraud Hotline at 1-855-303-9470.
o If you suspect elder abuse is also involved, contact adult protective services.

Why You Need to 
Read the Fine Print

According to a recent Deloitte survey, 91 percent of people agree to terms and conditions without reading the legal agreement. While reading through the legally complex language may be slow and painful, it’s more important than you think. Here are four reasons why reading entire legal agreements make sense: 

1. You miss a major technicality. Many agreements have an exit penalty that requires you to pay for a period of time after you terminate an agreement. Others automatically renew your agreement for a year with exit penalties unless you tell them in writing you do not wish to renew prior to a key date. In a recent example of missing a legal technicality, eight teachers claimed the Department of Education (DOE) mishandled a debt forgiveness program that promised to reduce student loans after 10 years of public service. In most of the cases, the teacher’s application was denied because, according the to the DOE, they were in the wrong type of loan or payment program.


2. You give something away.With extensive agreement documents (PayPal’s user agreement is over 50 pages long!), it’s easy for a company to add language that grants itself rights to something that’s yours. Here are some examples:

a. Your identity. Companies like Facebook grants itself rights to use your likeness and personal information for targeted advertising unless you catch the clause and take action.

b. Your work. If you create a presentation using some online tools, the agreement might allow the site to use the presentation without your permission.

c. Your location. Most navigation software tracks your location even when not using their application. The same is true with most newer vehicles.The only way to catch these tracking rights is to read the clause in the agreement.

3. You're not comfortable with the risks. Data breaches are occurring more often and are hard to prevent. To reduce their exposure to litigation, businesses are continuing to add language to agreements to protect themselves. Your job, as the consumer, is to know these risks when signing up for a new service. The more personal information you provide, the more important it is to understand your legal recourse if the supplier of your service is hacked.

4. You miss something good. Reading an agreement to the end may pay off. A woman in Georgia won $10,000 just by reading her travel insurance agreement. The company, Squaremouth, had a Pays to Read program that awarded a cash prize to the first person to read the clause with a cash prize. For most people, it’s more likely you’ll find additional benefits that come with the agreement or laugh at some humor injected by the company. Here is an example from social media company, Tumblr: "You have to be at least 13 years old to use Tumblr. We’re serious: it’s a hard rule, based on U.S. federal and state legislation. “But I’m, like, 12.9 years old!” you plead. Nope, sorry. If you’re younger than 13, don’t use Tumblr. Ask your parents for a Playstation 4, or try books."


Consider the Tax BEFORE You Sell
Multiple tax rates hold the key

In times of market volatility or when a financial need arises, it is only natural to consider selling some investments. Understanding the tax consequences is key to making an informed and planned decision. Here is what you need to know BEFORE you sell:

* a 3.8% net investment income tax may also apply to these earnings.

As the above tax rate chart suggests, understanding the tax consequence of selling an investment
can be complicated. Your tax obligation could be subject to no tax or up to 37 percent plus an 
additional 3.8 percent for the net investment income tax. Here are some ideas to consider:

Within retirement accounts:

• Generally not taxable. Selling investments within your retirement accounts is not usually a 
taxable event. The potential tax event occurs when you take the funds out of your account
either by a withdrawal or occasionally as a rollover into another account.

• Follow the account rules. Each of your retirement accounts has its own set of rules. If you follow
them, you can avoid early withdrawal penalties. Following the holding period rules within Roth 
accounts can also make your withdrawals tax-free.

Gains and losses outside of retirement accounts:

• Losses. Your losses are first used to offset any investment gains. Any excess losses can offset 
your ordinary income up to $3,000 per year. So the benefit of losses can be worth next to nothing 
or up to 37 percent if it offsets ordinary income.

• Non-investment losses. Unfortunately, individuals may not offset losses on the sale of non-investment
property. So if you sell a car and make money, you need to report the gain. If you sell the car and lose 
money, there is no deductible loss unless it is part of a business transaction.

• Long-term better than short-term. Holding an investment for longer than one year is key if you want 
to minimize your tax obligation. Short-term gains are taxed the same as wages.

Remember your investment decisions can often have quite different tax consequences. 
The best suggestion is to seek adviceBEFOREyou sell.
                      August 2019
This Month

September 2nd: Labor Day
Summer is starting to wind down and the kids will soon be headed back to school. Now is a great time to review if you've had, or will have, any special taxable events this year. The first article highlights five taxable items that come as a surprise to many people. This month's newsletter also includes ways to manage the burden of student loan debt, and cash flow strategies that can save your business.

Call if you would like to discuss how this information relates to you. If you know someone who can benefit from this newsletter, feel free to send it to them.

I Owe Tax on That?
5 Surprising Taxable Items

Wages and self-employment earnings are taxable, but what about the random cash or financial benefits you receive through other means? If something of value changes hands, you can bet the IRS considers a way to tax it. Here are five taxable items that might surprise you:

1. Scholarships and financial aid. Applying for scholarships and financial aid are top priorities for parents of college-bound children. But be careful - if any part of the award your child receives goes toward anything except tuition, it might be taxable. This could include room, board, books, travel expenses or aid received in exchange for work (e.g., tutoring or research). Tip: When receiving an award, review the details to determine if any part of it is taxable. Don't forget to review state rules as well. While most scholarships and aid are tax-free, no one needs a tax surprise.

2. Gambling winnings. Hooray! You hit the trifecta for the Kentucky Derby. But guess what? Technically, all gambling winnings are taxable, including casino games, lottery tickets and sports betting. Thankfully, the IRS allows you to deduct your gambling losses (to the extent of winnings) as an itemized deduction, so keep good records. Tip: Know when the gambling establishment is required to report your winnings. It varies by type of betting. For instance, the filing threshold for winnings from fantasy sports betting and horse racing is $600, while slot machines and bingo are typically $1,200. But beware, the gambling facility and state requirements may lower the limit.

3. Unemployment compensation. Unfortunately the IRS doesn't give you a break on the taxes for unemployment income. Unemployment benefits you receive are taxable. Tip: If you are collecting unemployment, you can either have taxes withheld and receive the net amount or make estimated payments to cover the tax liability.

4. Crowdfunding. A popular method to raise money for new ventures or to support a special cause is crowdfunding through websites. Whether or not the funds are taxable depends on two things: your intent for the funds and what the giver receives in return. Generally, funds used for a business purpose are taxable and funds raised to cover a life event (e.g., special causes or medical assistance) are considered a gift and not taxable to the recipient. Tip: Prior to using these online tools to raise money, review the terms and conditions and ask for a tax review of what you are doing. If you need to account for taxes, reserve some of what you raise for this purpose.

5. Cryptocurrency. Cryptocurrencies like Bitcoin are considered property by the IRS. So if you use cryptocurrency, you must keep track of the original cost of the coin and its value when you use it. This information is needed so the tax on your gain or loss can be properly calculated. Remember, the tax rate on property can vary if you own the cryptocurrency more than a year, so record all dates. Tip: For those considering replacing cash with things like Bitcoin, you need to understand the gain or loss complications. For this reason, many people using cryptocurrency do so for speculative investment purposes.

When in doubt, it's a good idea to keep accurate records so your tax liability can be correctly calculated and you don't get stuck paying more than what's required. Please call if you have any questions regarding your unique situation.

Smart Tactics to Manage Student Debt

According to the Federal Reserve, U.S. student loan debt is now $1.5 trillion with more than 44 million borrowers. Only mortgage debt currently has bigger numbers among types of consumer debt. Even worse, more than 10 percent of these loans are past due. Here are some tactics to help make student debt easier to manage:

• Know the loan terms. Not all student debt is created equal. Understanding the terms of all your student loans is important. With this knowledge, select the correct loan option and know which loan to pay first. Things you should know about each loan include: 

o The interest rate
o The term of the loan
o Amount of any up front fees
o Pre-payment penalties (if any)
o When interest and payments start
o Payment amounts
o Payment flexibility
o How the interest is calculated


Suggestion: Create a spreadsheet with a student loan in each column. Then note the terms under each loan. This will create a strong visual of your situation and show you which loans are most important. 

• Avoid accruing interest. Some student loans accrue interest while you are in school. With the compounding of this interest, your student loan amount continues to grow with each passing year before repayment begins. Banks love this - you should not. Suggestion: Figure out how to make some or all of the interest payments while in school. This will not only lock the amount you owe, it will reduce the amount of overall loan payments.

• Pay a little extra in the early days. The math of loans benefits banks in the early years of the repayment period. This is because the vast majority of interest is paid in the first years of repayment. By the time you get to the last year of repayment, payments are primarily the principal balance and interest is nil. Suggestion: Pay extra every month as soon as payments start. While this seems impossible as you enter the workforce, even $25 extra per month can dramatically reduce the amount of total payments you make over the life of your loan. For example, a $25 extra payment on a 10-year $50,000 student loan with 5 percent interest would cut six months off the loan, save $834 in interest, AND save $3,180 in future loan payments!

• Make small cuts elsewhere. Having a hard time finding a few extra dollars to make extra payments? Consider observing and then changing your spending habits. Suggestion: Purchase one less latte a week. Drop one monthly service from a bill. Eat in more often. Then use these savings as a bonus payment on your student loan principal.

While student debt is often an unavoidable outcome of getting a college education, it can be minimized if actively managed. Small changes can yield results if planned for in advance.

Cash Flow Concepts That Can Save Your Business

A sad and oft-repeated truth is that half of all new businesses fail within the first five years. Although many factors contribute to business failure, a common culprit is poor cash management. All businesses, large and small, must deal with the uncertainty of fluctuating sales, inventories a nd expenses. Follow these practices to moderate the ebb and flow of cash in your business:

• Analyze cash flow. If you don't know it's broken, you can't fix it. The starting point for any meaningful action to control cash is discovering where the money's coming from and where it's going. Get a handle on cash by monitoring your bank accounts for at least one complete business cycle; then use that information to establish a realistic forecast. This should be done throughout the year to help you understand your seasonal cash needs.

• Monitor receivables. Extending credit to risky customers, failing to identify late payers, refusing to collect payment on a timely basis — these practices amplify cash flow problems. Mitigate receivable fluctuations by generating aging reports. Use the report to follow up when payments are late. You may even wish to offer discounts to customers who pay early.

• Slow down payments. Prudent cash flow management dictates that you retain cash as long as possible. So pay your vendors on time — not too early. Of course, if suppliers offer discounts for early payment, take advantage of cost savings whenever possible. Also consider negotiating with suppliers to extend payment terms.

• Time large expenses. If you know a property tax payment is due in May, start setting aside money in a separate fund in October. The same holds true for any large payment that comes due during the year. If your equipment is nearing the end of its useful life or your roof is showing signs of wear, start saving now. Don't let big expenditures catch you by surprise.

By taking these steps and endeavoring to smooth out cash fluctuations, proficient managers keep their companies strong throughout the business cycle.

No Excuses. Time to Lower Your Tax Bill

It's easy to push tax planning to the sidelines when tax laws are ever-changing and hard to understand. Here are some common (but often unfounded) reasons for avoiding tax situations, plus tips to help get past them and start paying less tax this year:

• It doesn't make a difference. This point of view is especially problematic in years with unique situations.Even in uneventful years, external forces like new tax laws can be managed if planned for in advance.
o Selling a house? You can avoid taxes if primary residence requirements are met.
o Starting a business? Choosing the correct entity can save you a bunch of taxes.
o Getting ready to retire? Properly balancing the different revenue streams (part-time wages, Social Security benefits, IRA distributions and more) has a huge impact on your tax liability.

• It's out of your control. Timing is important when it comes to minimizing taxes, and the timing is often in your control. Bundling multiple years of donations into one to get a deduction, holding investments over one year to get a lower tax rate, and making efficient retirement withdrawals are just some examples of prudent tax strategies that you control.

• There's not enough money. There are tax strategies to be implemented at all income levels, not just those at the top of the tax bracket. Tax deductions are available for student loan interest, IRA contributions and others even if you claim the standard deduction. Certain tax credits (called refundable credits) will increase your refund even if you don't owe taxes. Missing any of these tax breaks can unnecessarily increase your taxes.

• I only need help at tax time. When the standard deduction doubled in 2018, many people assumed they could kick their feet up and wait for a big refund. That assumption proved to be false for a large number of taxpayers when their refunds came in lower than expected or turned into a tax bill. Don't let this happen to you! Every year has it's own set of changes and challenges that you should plan for well before tax time rolls around.

• It's too overwhelming. Tax planning is often as simple as looking for ways to reduce taxable income, delay a tax bill, increase tax deductions, and take advantage of all available tax credits. The best place to start is to bolster your level of tax knowledge by picking up the phone and asking for assistance.

Thankfully, it's not too late to get on track for 2019. If you haven't scheduled a tax-planning meeting, now is a great time to do so.


July 2019
Tax day might seem far away, but waiting until year-end to make your tax moves may prove costly to you. Maximizing your tax savings starts with an effective mid-year strategy! Detailed here are some ideas to kick-start your summer tax planning. This issue also includes methods for protecting your Social Security Number, and an infographic with key IRS audit information.

Call if you would like to discuss how this information relates to you. If you know someone who can benefit from this newsletter, feel free to send it to them.
This Month 

July 4th: Independence Day
Effective Tax Planning Starts Now!

With summertime activities in full swing, tax planning is probably not on the top of your to-do list. But putting it off creates a problem at the end of the year when there’s little time for changes to take effect. If you take the time to plan now, you’ll have six months for your actions to make a difference on your 2019 tax return. Here are some ideas to get you started.

1. Know your upcoming tax breaks. Pull out your 2018 tax return and take a look at your income, deductions and credits. Ask yourself whether all these breaks will be available again this year. For example:Any changes to your tax situation will make planning now much more important.
a. Are you expecting more income that will bump you to a higher tax rate?
b. Will increased income cause a benefit to phase out?
c. Will any of your children outgrow a tax credit?

2. Make tax-wiseinvestmentdecisions. Have some loser stocks you were hoping would rebound? If the prospects for revival aren’t great, and you’ve owned them for less than one year (short-term), selling them now before they change to long-term stocks can offset up to $3,000 in ordinary income this year. Conversely, appreciated stocks held longer than one year may be candidates for potential charitable contributions or possible choices to optimize your taxes with proper planning.

3. Adjust your retirement plan contributions. Are you still making contributions based on last year’s limits? Maximum savings amounts increase for retirement plans in 2019. You can contribute up to $13,000 to a SIMPLE IRA, up to $19,000 to a 401(k) and up to $6,000 to a traditional or Roth IRA. Remember to add catch-up contributions if you’ll be 50 by the end of December!

4. Plan for upcoming college expenses. With the school year around the corner, understanding the various tax breaks for college expenses before you start doling out your cash for post-secondary education will ensure the maximum tax savings. There are two tax credits available, the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit. Plus there are tax benefits for student loan interest and Coverdell Savings accounts. Add 529 college savings plans, and you quickly realize an educational tax strategy is best established early in the year.

5. Add some business to your summer vacation. If you own a business, you might be able to deduct some of your travel expenses as a business expense. To qualify, the primary reason for your trip must be business-related. Keep detailed records of where and when you work, plus get receipts for all ordinary and necessary expenses!

Great tax planning is a year-round process, but it’s especially effective at midyear. Making time now not only helps reduce your taxes, it puts you in control of your entire financial situation.
How 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 ID, your SSN is virtually permanent. While most instances of SSN theft are outside your control, there are some things that you can do to minimize the risk of this ever happening to you.

• 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 who really need to know your SSN. Here is that list:
o The government. The federal and state governments use this number to keep track of your earnings for retirement benefits and to ensure you pay proper taxes.
o Your employer. The SSN is used to keep track of your wages and withholdings. It also is used to prove citizenship and to contribute to your Social Security and Medicare accounts.
o Certain financial institutions. Your SSN is used by various financial institutions to prove citizenship, open bank accounts, provide loans, establish other forms of credit, 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 happens.

What You Need To Know About IRS Audits

The IRS recently released its 2018 Data Book, including information on its audit activities for the last fiscal year. This details what you need to know regarding your audit risk, how to prepare for and what to expect in an IRS audit.

Know the facts

• An IRS audit is a review to ensure your tax filings are reported correctly according to tax laws.
• Both individual and business tax returns can be audited.
• The IRS won’t initiate an audit by telephone.

IRS Audit Statistics

Totals                                                                                          FY 2015                             FY 2016                            FY 2017                                     FY 2018
Tax returns filed in prior calendar year                      191,857,005                       192,936,878                      195,614,161                              195,750,099
Audits                                                                                         1,373,788                            1,166,379                         1,059,924                                     991,168
Percentage of returns audited                                                                                                      Less than 1%

What are your chances of being audited?
It depends. But for most taxpayers, LOW. Approximately 1 in 198 tax returns were audited in 2018.
The IRS audited 0.6% of all individual income tax returns filed in 2018, and 0.91% of corporation tax returns (excluding S corporations)

There are two types of audits:
• Field audit: An in-person interview and review of records. It often happens at taxpayer’s home, business or accountant’s office.
• Correspondence audit: A written request for more info about a specific tax return item or issue handled via mail.

Did you know? Approximately 2/3 of audits are handled through the mail.

Reasons you may be audited

Although the IRS uses random selection as one method to choose tax returns to audit, it may also flag returns because:

1. You’re in a higher income tax bracket.
2. You have math errors on your tax return.
3. You report no income or not all of your income.
4. Your tax return involves issues with other taxpayers whose returns are being audited.

Other reasons: reporting too many losses, deducting too many work expenses and claiming too many charitable contributions may also trigger an audit.

Always be prepared

Use your past tax return as a checklist of items to keep on hand:

• A copy of your signed tax return and all supporting documents
• Worksheets that support your return
• Forms W-2
• Forms 1099 (all versions)
• Forms 1095
• Business Forms K-1
• Canceled checks of deducted items
• Receipts supporting deducted items
• Itemized deduction support
• Child care receipts and reporting documents
• Bank statements
• Investment statements
• Mortgage statements
• Credit card statements
• Major purchases or sales
• Receipts for any charitable donations
• Proof of fair market value for any inherited items
• Mileage logs for business, charitable and medical transportation
• Business meals and cellphone use documentation
• Educational expenses

FYI: Always use copies of records during an audit. Keep your original documents.

More ways to prepare: Check IRS.gov to review its Audit Techniques Guides (ATGs). They are used by IRS examiners and can identify areas for potential audits, as well as help you understand what the IRS may question.

What to do if you’re audited

Your tax return may never be audited. But if it happens, here are a few tips to make the process go more smoothly:
• Respond to the IRS in a timely manner. If you don’t, an in-person meeting may happen.
• Ask for help. NEVER tackle the IRS alone!
• Know what is being asked. Get a clear understanding of the core questions.
• Understand how the auditor has been trained. IRS auditors are trained in certain areas. These are published in the ATGs.

The bright side: If you are audited, you may end up with a refund. In FY 2018, approximately 30,000 audits resulted in refunds, totaling $6 million.

Sources: IRS.gov, Kiplinger.com, Forbes.com, Nerdwallet.com

June 2019
This Month 

-June 16: Father's Day-
-June 17: 2nd Quarter estimated taxes due-
-June 17: 2018 Tax deadline for U.S. citizens living abroad-
Summertime offers unique tax saving situations. Outlined here are five ideas everyone can use. This issue also discusses possible payroll fraud schemes. Finally, spend a minute reviewing the wisdom of asking for help should you be contacted by the IRS.

Call if you would like to discuss how any of this information relates to you. If you know someone that can benefit from this newsletter, feel free to send it to them.
 
5 Summer Tax Savings Opportunities

Ah, summer. The weather is warm, kids are out of school, and it’s time to think about tax saving opportunities! Here are five ways you can enjoy your normal summertime activities and save on taxes:

1. Rent out your property tax-free. If you have a cabin, condo, or similar property, consider renting it out for two weeks. The rental income you receive on property rented for less than 15 days per year is not considered taxable income. In addition, you can still deduct your mortgage interest expense and property taxes in full as itemized deductions!. Track the rental days closely — going over 14 days means all rent is taxable and rental income rules apply.

2. Take a tax credit for summer childcare. For many working parents, the summer comes with the added challenge of finding care for their children. Thankfully, the Child and Dependent Care Credit can cover 20-35 percent of qualified childcare expenses for your children under the age of 13. Eligible types of care include day care, nanny fees and day camps (overnight camps and summer school do not qualify).

3. Hire your kids. If you own a business, hire your kids. If you are a sole proprietor and your child is under age 18, you can pay them to work without withholding or paying Social Security and Medicare tax.

4. Have a garage sale. In general, the money you make from a yard or garage sale is tax-free because you sell your goods for less than you originally paid for them. Once the sale is over, donate the remaining items to a qualified charity to get a potential charitable donation deduction. Just remember to keep a log of the items you donate and ask for a receipt.

5. Start a Roth IRA for your children. Roth IRA contributions are limited to the amount of income your child earns, so earned income is key. This can include income from mowing lawns or selling lemonade. Start making contributions as soon as your child makes some money to take advantage of the tax-free earnings available in a Roth IRA.

Taking the time this summer to execute these tips can put extra money in your pocket right away and provide you tax-saving happiness in the future.
Payroll Fraud Schemes Every Business Should Know

According to the Association of Certified Fraud Examiners, nearly 30 percent of businesses are victims of payroll malfeasance, with small businesses twice as likely to be affected than large businesses. Here are four scary payroll fraud schemes you need to know:

• Ghost employees. A ghost employee does not exist anywhere except in your payroll system. Typically, someone with access to your payroll creates a fake employee and assigns direct deposit information to a dummy account so they can secretly transfer the money into their own bank account.
• Time thieves. Time stealing happens when employees add more time to their timecard than they actually worked. Sometimes multiple employees will team up to clock each other in earlier than when they arrive or later than when they depart for the day.
• Shape-shifting commissions. In an attempt to bump up a commission payment or attain a quota, sneaky sales employees may alter a sales contract to their benefit. A typical tactic used by a dishonest salesperson is to make a booked sale appear larger than it is and then slide a credit memo through the system in a later period. Companies with complicated commission calculations or weak controls in this area are the most vulnerable.
• External swindlers. A popular scam, known as phishing, starts with a fraudster impersonating a company executive through email or over the phone asking an employee with access to payroll data to wire money or provide sensitive information. These imposters can make the correspondence look very real by using company logos, signatures and email addresses.

Tips to Combat Payroll Fraud

Being aware of the threats is a start, but you also need to know how to stop them. Here are some tips to reduce your companies payroll fraud risk:

• Better internal controls. While most employees are trustworthy, giving too much control over your payroll to one person is not a good idea. Separating payroll duties and formalizing an approval process protects both your business and your employees.
• Review payroll records. Designate someone outside of the payroll-processing department to periodically review the payroll records. Have them review names, pay rates and verify that the total payroll matches what was withdrawn from the business bank account.
• Perform random internal audits. During an internal audit is when you can really get into the details to look for potential payroll fraud. You can do an in-depth review of the whole payroll system or select a random sample of dates and employees. Keep the timing of the audit under wraps to prevent giving someone the chance to cover up their misdeeds.

Managing your business payroll is a daunting task by itself, and actively protecting against fraud adds additional complexity. Please call for help with your business payroll needs.

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.

How to Save When Attending a Wedding

Planning on attending a wedding or two (or three or four...) this summer? If you’re not careful the costs will add up fast, especially if travel is involved. Here are five tips to survive the financial cost of wedding season:

1. Give a price-savvy wedding gift. Most people want to give a wedding gift that, on some level, reflects the relationship they have with the couple. That doesn’t mean it has to be expensive. Check wedding registries early to give you more reasonably priced options before they're gone, consider splitting the cost of a bigger gift with family or friends, or if you're handy, make a thoughtful homemade gift. Sometimes your presence is a gift by itself, especially if you travel a long distance.
2. Be smart about 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 where you would be comfortable staying. If so, you might have a free place to stay! 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 home rental options like Airbnb and VRBO. Remember to figure out your accommodations early so you don’t get stuck with just one expensive option.
3. Rent your attire. Going to a bunch of weddings in a short amount time can cause a wardrobe problem, and buying a new outfit for each one will cost you some serious cash. 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.
4. Share your travel expenses. As mentioned earlier, odds are you will have some friends or family attending the same wedding as you. If the wedding involves some travel, split some of the costs with them. This can include carpooling (if you are taking a road trip), sharing a rental car, teaming up on taxi or ride-share expenses, as well as sharing hotel accommodations.
5. Respectfully decline. Whether it’s the cost of travel, bad timing or a different reason, 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 reason for your absence, but you don’t need to go into detail. When the wedding date comes, remember to send a card or a gift.

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

May 2019
With tax season in the rear-view mirror, it's full speed ahead into tax planning season. While it's important for everyone to have a tax road map, there are key situations that require extra attention so you can avoid a major tax pothole. This issue includes lessons to learn from some high-profile tax scandals, sneaky vacation costs that can ruin your vacation, and an inside look at some key characteristics of a great bookkeeping system.

Call if you would like to discuss how any of this information relates to you. If you know someone that can benefit from this newsletter, feel free to send it to them.

This Month

- May 12: Mother's Day -
- May 15: Exempt Organization Tax Returns Due -
- May 27: Memorial Day -
You Know You Need Tax Planning If...

Effective tax planning helps you make smart decisions now to get the future outcome you desire - but you need to make sure you don't miss anything. Forget to account for one of these situations and your tax plans will go off the rails in a hurry:

1. Getting married or divorced. One plus one does not always equal two in the tax world. Marriage means a new tax status, new deduction amounts and income limits, and a potential marriage penalty. The same is true for divorce, but with added complexity. Untangling assets, alimony, child support and dependents are all considerations worthy of discussion.

2. Growing your family. While bringing home a new child adds expenses to your budget, it also comes with some tax breaks. With a properly executed plan, you can take home the savings now to help offset some of those new costs. If you are adopting, you get an additional tax credit to help with the adoption expenses.

3. Changing jobs or getting a raise. Earning more money is great, but if you're not careful, you might be surprised by the tax hit. Each additional dollar you earn gets taxed at your highest tax rate, and might even bump you to the next tax bracket. If you are switching jobs, the change also includes things like new benefit packages to consider.

4. Buying or selling a house. Whether you're a first-time homebuyer, you're moving to your next house, or you're selling a house, there will be tax implications resulting from the move. Knowing how your taxes will be affected ahead of time will help you make solid financial decisions and avoid surprises. If you're looking to buy or sell investment property, even more tax issues come into play.

5. Saving or paying for college. There are so many different college tax breaks, it can be tricky to determine which ones might make the most sense for your situation. These include the American Opportunity Tax Credit, the Lifetime Learning Credit, the Coverdell Education Savings Account, 529 plans and student loan interest deductibility.

6. Planning for retirement. Everyone needs to plan for retirement, but each situation is different. Some of the factors to keep in mind include employment status, current income, available cash, future earnings and tax rates, retirement age and Social Security. Putting all of these variables into one analysis will paint a clearer picture of your retirement strategy and provide a way forward.

Don't make the mistake of omitting key details from your tax plan. Call now to schedule a tax-planning meeting.

Al Capone, Aunt Becky, Tax Fraud and You!

How you can learn from high-profile tax scandals
The recent collegeadmissionscandal involving Lori Loughlin (who played Aunt Becky in the Full House TV series) and others is shedding light on just one way people allegedly cheat on their taxes. Here are examples of some famous people in tax trouble with the IRS and helpful hints to make sure it doesn't happen to you:

1. Lori Loughlin and questionable charitable donations. In this case, the IRS would investigate whether payments deducted as charitable contributions on her tax return were really charitable contributions. Regardless of how the legal charges shake out, Loughlin is looking at a large tax bill if the charity she contributed to is stripped of their non-profit status.

Helpful hint: Charitable giving must be to legitimate charitable organizations, for legitimate purposes, and must be reduced by any value received in return.

2. Al Capone and his illegal earnings. After years of bribing and wriggling his way out of violent crime charges, Capone was charged with 22 counts of tax evasion for not reporting income on illegal activities. He was sentenced to 11 years in prison - some of which were served at Alcatraz prison in San Francisco.

Helpful hint: ALL income - even if obtained illegally - is taxable.

3. Wesley Snipes decided not to file his taxes. In 2008, actor Snipes was convicted for not filing tax returns from 1999 to 2001. Among his many arguments, Snipes used the tax protester theory claiming domestic income is not taxable. After jail time, Snipes' offer in compromise to lower his $23 million tax bill request was shot down by the IRS.

Helpful hint: Exotic tax schemes are actively monitored by the IRS. If it seems to good to be true, it probably is too good to be true and requires a second opinion.

4. Leona Helmsley faked her business expenses. Helmsley, A famous real estate mogul in the 1980s, had more than $8 million of renovations to her private home billed to one of her hotels so she could deduct the expense on her taxes. After being convicted, Helmsey had to pay back the $8 million and served 18 months in prison.

Helpful hint: Separate business expenses from personal expenses. Open separate bank accounts and never intermingle expenses. The IRS is quick to disallow deductions when personal expenses and business expenses are mixed together.

5. Pete Rose hid his "likeness" income. Many famous athletes go on to sell autographs, memorabilia and get paid for appearances after they retire from their sport. Rose was no different, but he opted not to report the $354,968 he earned over a four-year period. The result was five months in prison and a $50,000 fine in addition to having to pay back the taxes he tried to avoid.

Helpful hint: Don't attempt to hide income. With less and less businesses using cash payments, the IRS now can use matching programs to quickly find underreporting problems.

While seeing well-known celebrities in the press for tax trouble makes for interesting reading, there are useful tax lessons for all of us. It provides an opportunity to see how IRS employees think and what they are reviewing.


4 Key Elements of Great Business Books

Your bookkeeping system is the financial heart and lifeblood of your business. When set up and operating properly, your books help you make smart decisions and seamlessly turn your financial data into useful information. Here are four key characteristics to build and maintain a healthy bookkeeping system:

1. Select the proper accounting method
There are two different methods for recording transactions: cash-basis and accrual-basis. In general, cash-basis records a transaction when payment is made where accrual-basis books the transaction upon delivery of the good or service. Cash-basis is easier to track and a useful option for smaller businesses and sole-proprietors. Where as larger businesses who buy from vendors on account (accounts payable) generally use accrual-basis accounting.

Selecting the proper method affects any related financial transactions and how your financial statements are displayed. A correct approach will also include consideration of outside factors, including: IRS rules (businesses with more than $25 million in gross receipts must use accrual-basis), bank covenants, and industry standards. Once a choice is made, it can be changed but it must be properly reported to the IRS.

2. Create an account structure that fits the company
Every business has a chart of accounts included in their bookkeeping system. These accounts sort the business's transaction data into six meaningful groups. They are assets, liabilities, equity, income, cost of goods sold and other expenses. Each group will often have numerous accounts and sub-accounts associated with them.

Having the right mix of accounts created and grouped in an organized fashion will help you properly classify transactions and prepare usable financial statements. The proper account structure for your company will mesh with your specific information needs.

3. Enter accurate and timely transactions
The value your data provides is dependent on each transaction being recorded correctly and on time. Entering transactions in the wrong account can cause major issues down the road. Financial reporting that is delayed can hide problems that need immediate attention. Some transactions are relatively straightforward, and some are more complex (like payroll, accruals and deferrals).

It's important to have someone who understands both your business and the accounting rules enter your transactions in a timely fashion. In addition, a good month-end close process that involves reviewing each account, will find mistakes from the initial entries.

4. Establish financial statements for decision-making
The main financial statements are the income statement (income - expenses = gross profit), the balance sheet (assets = liabilities + equity) and statement of cash flow. Each statement has a specific purpose:

a. Income statement. The income statement shows company performance for a select period of time; typically monthly with a full year summary. At the end of each year the income statement restarts.
b. Balance sheet. The balance sheet displays a company's overall health as of a certain date. It is perpetual. This means it doesn't end until the business is closed or sold. It includes one line that summarizes the current year and prior year results from the income statement.
c. Statement of cash flow. This statement summarizes the inflow and outflow of cash. It ensures you know whether you have enough cash and the pattern of your cash position over time.

If properly executed, your bookkeeping system will turn out accurate financial statements that can be used for several tasks - financial reporting, budgeting, forecasting, raising capital, applying for a loan, tax reporting and decision making. Feel free to call with any questions or to discuss bookkeeping solutions for your business.

Watch Out! 7 Vacation Costs That Sneak Up on You

Going on vacation is a time to get away, relax and enjoy new experiences. But if you don't pay close attention, extra costs can sneak up on you like tiny money-stealing ninjas. Here are seven sneaky vacation costs to watch out for:

1. Covert airfare increases. Airline pricing algorithms are programmed to store your browsing history to see if you've been looking at flights. If you have, they will bump up the price. Before searching, clear your internet history and switch to private (or incognito) mode on your web browser. When you are finally ready to book the flight, do so using a different computer from a new location to be sure that you're avoiding this artificial price increase.

2. Stealthy resort fees. The nightly base rate for a fancy resort will often compare favorably to a standard hotel in the same location. This is an intentional pricing tactic by resorts to get their rooms on the initial search results page. Don't be fooled! These same resorts will add a daily resort fee on the back end of your bill to cover the extra amenities they offer. The extra fee might be worth it to you, but it's better to understand the full cost of the stay before making your reservation.

3. Useless rental car insurance. Rental car companies will try to sell you insurance to cover damages you may cause during the rental period. Often, the auto insurance you already have will extend to the rental car. In these cases, the extra insurance isn't necessary. Before renting a car, check with your insurance company to see if a rental will be covered. 

4. Bloated baggage fees. You probably already know that airlines may charge for checking a bag, but do you know they will charge extra if a bag is too heavy? Exact weight can vary by airline or location, so check the weight limits before you go and weigh any heavy bags using a bathroom scale.

5. Crafty parking costs. Downtown hotels in big cities charge as high as $75 per night for parking! Research alternative parking options near your hotel or compare the cost of using rideshare options before committing to the hotel rate.

6. Sly extra driver charges. Rental car companies will charge an extra daily fee to have a second driver listed on the rental. If possible, commit to one person to handle all the driving on your vacation.

7. Tricky foreign transaction fees. Traveling abroad and paying an extra fee for every purchase will add up in a hurry. Before you go, check your credit cards and bank accounts to see if they charge foreign transaction fees. If they do, shopping for another card or account that doesn't charge fees might make sense.

Some vacation fees can't be avoided, but many of them can if you know where to look. Implement a plan to navigate the fees in the planning stages of your trip to avoid dealing with them during your vacation.

The Casualty Loss Problem
What you can do to help

Tax laws severely limit who can deduct losses on their tax return caused by a catastrophic event. Now unless a loss is in a presidentially declared disaster area, victims are on their own to pick up the pieces. This is creating problems for those on the fringe of a major disaster and those who have a local casualty loss like a local flood or fire.

Possible Solutions

With tax savings no longer available to help cover some of the damages, victims need to find relief in other areas. Here are some ways that you can help fill this void:

1. Send a gift. While direct gifts are not tax-deductible, the IRS allows gifts of cash or property to any one person valued up to $15,000 each year without having to report it on a gift tax return. Check with the victim to see if they have any specific needs. Maybe you have an extra car or some furniture that you can spare.
2. Start a crowdfunding campaign. Organizing a fundraiser on websites like GoFundMe or Fundly is a great way to raise money for someone suffering a disaster. Once created, you can share on social media to raise awareness and ask others to join you in support. This approach can take the form of many small donations adding up to a large gift for the victim. Be aware that donations to individuals, even through crowdfunding, are also considered gifts.
3. Offer your time. Volunteering your time is often more valuable than a financial gift. After experiencing a loss, victims will feel pulled in multiple directions. Helping with cleanup or repairs, organizing meals, watching children, or offering your expertise are some examples of how you can reduce their burden. Try to coordinate your efforts with local charities as they will be better able to use your talents where they are needed.
4. Donate to charity. There are many reputable charities and local churches that are ready to help when disaster strikes. These organizations rely on donations to continue to provide for people in need. Just make sure the charity is legitimate before you give them your money. Websites like CharityWatch and Charity Navigator are good resources for identifying trustworthy charities. Remember, charitable donations to qualified charities are tax-deductible as an itemized deduction, so keep good records and save receipts.

Be a watchdog for scams

Opportunists and scammers come from every direction when losses occur. Their goal is to exploit the victim's suffering and inexperience with the situation to benefit themselves. Fraudsters may set up fake charity funds or pose as inspectors, building contractors or even government agents. With so many things to handle and emotions to process, the victim may be too overwhelmed to see through a scam. Here is where you can help. Take a skeptical approach to anyone soliciting business from the disaster and don't trust anyone who asks for money.

Thankfully, victims living in presidentially declared disaster areas can still deduct casualty losses on their taxes, but people suffering localized losses cannot. Any assistance you can provide will help ease their suffering during a difficult time.

April 2019 
This Month 
April 15th: 
Individual tax returns due
C Corporation tax returns due
First-quarter 2019 estimated tax due
April 21st: 
Easter Sunday
Other April 15th Deadlines:
Six month filing extension
2018 gift taxes
2018 IRA contributions
2018 HSA contributions
Tax day is upon us!  This issue includes handy metrics to track your business performance, tips to help you decide if you should buy or lease your next vehicle, and five big questions people are asking as the tax deadline approaches.

Call if you would like to discuss how any of this information relates to you. If you know someone that can benefit from this newsletter, feel free to send it to them.

Tax Day is Here!
5 Big Questions People Are Asking

The individual tax deadline of April 15 is fast approaching. Do you have all your tax arrangements in order? Here are five important questions that people are asking.

1. What happens if I don't file on time? There's no penalty for filing a late tax return after the deadline if you are set to receive a refund. However, penalties and interest are due if taxes are not filed on time or a tax extension is not requested AND you owe tax.To avoid this problem, file your taxes as soon as you can because the penalties can pile up pretty quickly. The failure-to-file penalty is 5 percent of the unpaid tax added for each month (or part of a month) that a tax return is late.

2. Can I file for an extension? If you are not on track to complete your tax return by April 15, you can file an extension to give you until Oct. 15 to file your tax return. Be aware that it is only an extension of time to file - not an extension of time to pay taxes you owe. You still need to pay all taxes by April 15 to avoid penalties and interest.So even if you plan to file an extension, a preliminary review of your tax documents is necessary to determine whether or not you need to make a payment when the extension is filed.

3. What are my tax payment options? You have many options to pay your income tax. You can mail a check, pay directly from a bank account with IRS direct pay, pay with a debit or credit card (for a fee), or apply online for an IRS payment plan.No matter how you pay your tax bill, finalize tax payment arrangements by the end of the day on April 15.

4. When will I get my refund? According to the IRS, 90 percent of refunds for e-filed returns are processed in less than 21 days. Paper filed returns will take longer.24 hours after you receive your e-file confirmation (or 4 weeks after you mail a paper tax return), you can use the Where's My Refund? feature on the IRS website to see the status of your refund.

5. Oops, I forgot a tax document. Now what? The first thing to do is determine the impact the new information has on your filed return. For example, if you claim the standard deduction and then receive a mortgage interest statement that does not bring your expenses above the deduction threshold, there's nothing more you need to do. Simply file the statement with your other tax documents.If, on the other hand, you receive something like a Form 1099 with additional income, you will need to amend the tax return to claim the income. In cases like this, please call in order to review your situation and the timing of the correction.

4 Key Metrics to Fortify Your Business

Even the best, well-prepared business plans can unravel quickly without a process in place to evaluate performance. Creating a scorecard with quality metrics can give you the daily insight you need to successfully run a business without drowning in the details.

Create a scorecard that works

An effective scorecard gives you a holistic view of the state of your business in one report. The report consists of key financial and non-financial metrics to provide a daily look at the health of your business. To be useful, your measures should be concise, available on-demand, and include properly targeted data to help you quickly spot trends and react appropriately.
Effective business metrics to consider right now

1. Quick Ratio (financial)
Add up your total cash, short-term investments and accounts receivable. Then divide that total by your current liabilities. This is your quick ratio. It's a simple way to see if you have enough funds on hand to pay your immediate bills. A value of 1.0 or more means your liquid assets are sufficient to cover your short-term debts. A value less than 1.0 may mean you're relying too heavily on debt to fund your operations or pay expenses. 

2. Retention Percentage (customers)
First, create a list of customers who made purchases this year and a list of customers who made purchases last year. Then, remove all new customers gained in the current year. Divide the total number of customers from last year by the remaining number of customers for this year. This is your customer retention percentage. Measure this over time to see if your business is retaining or losing core customers. If you have a condensed sales cycle, you can shrink the period down further. For example, by looking at this calculation each month, you can see how it builds over the year. 

3. Asset Turnover Ratio (internal process)
Divide your total sales by average total assets from your company balance sheet. (beginning assets plus ending assets, divided by two) for the same time period. The end result tells you the amount of sales generated for each dollar committed to your assets. The number may not reveal much by itself, but when reviewed over time, you'll have a better understanding of whether the assets used to run your business are becoming more or less effective. 

4. Net Income Per Employee (growth)
Divide your net income by your total number of employees for a given time period. In theory, as your workforce develops, it should generate more income per employee. Remember to account for part-time employees prior to making your calculation (e.g., a part-time employee working 20 hours per week is 1/2 an employee for purposes of this calculation). If the income per employee is getting lower over time, figure out why. Perhaps you have high employee turnover, or there is an area of your company that can benefit from training. 

While each ratio may help you analyze different aspects of your business, they don't tell you the whole story. Finding the right mix of metrics for your scorecard can take some time, but the end result is a valuable tool that can take your business to the next level.

Leasing vs. Buying a Car

Knowing the tricks makes you a better decision-maker
There are many reasons for you to lease a car versus buy a car, but too often it is the auto dealer's profit motive that determines which method you use rather than what's best for your budget and lifestyle. To help you make an informed decision, here are some things to consider:

When to lease
• You want a car with lower down payments and monthly costs.
• You don't like making your own vehicle repairs.
• You prefer a new car every couple of years.
• You don't drive many miles each year.
• You are not hard on your vehicle.

When to buy
• You plan to have the vehicle for many years.
• You are willing to drive a used car.
• You drive more miles than a lease allows.
• You are worried about keeping the car in excellent condition.
• You want to work on or modify the car.

Tips to know if you decide to lease

If you think leasing a vehicle is an option for you, here are some tips to ensure you are making the best deal:

• Negotiate before revealing your intentions. Negotiate the price before telling the dealer you wish to lease. The purchase price you negotiate should be the price the dealer uses in calculating the lease payments as well as an outright purchase. If it is not, this technique forces the dealer to disclose this fact. 

• Ask about the annual percentage rate (APR). Ask the dealer to disclose the effective APR built into the lease. If the dealer gives you a lease factor instead of an interest rate, multiply the lease factor by 2,400 to get a general interest rate. For example, a lease factor of 0.0025 multiplied by 2,400 returns an interest rate of 6 percent. 

• Question the residual value. Ask what the projected residual value of the car is at the end of the lease. This value is often overstated by the dealer to artificially lower your lease payment, but can impact your ability to purchase your vehicle at the end of the lease. Future residual value is an estimate and can often be negotiated with the dealer. 

• Compare with a loan. Use the negotiated purchase price to calculate your loan payments. Use this information to compare your monthly lease payment with your car loan payment. 

• Read the lease agreement! If ever there is a time to read the fine print, leasing a car is one of them. Pay special attention to early termination clauses and cost for excess miles. These two factors can dramatically impact your lease versus buy decision. 

Don't Leave Your Business Exposed
5 Insurance Tips to Protect Your Assets and Your Bank Account

Have you conducted a business insurance review lately? Changes in your business equipment, real estate holdings, the amount of inventory, and the number of employees are all good reasons to review your insurance. Here are a few policy review tips to consider:

1. Keep in regular contact with your insurance company. Keep your insurance agent apprised of what you are doing in your business. Try to meet with your agent throughout the year, and conduct a detailed annual review of your insurance needs.

2. Understand how business changes affect your policy. Figure out how your policy covers common changes, as well as other changes you know are happening soon. This involves understanding the limits and terms of your policy. You can start by asking if you're properly insured for property damage, liability coverage, health and disability, and life insurance.

3. Conduct a competitive review. Periodically conduct a competitive review of your insurance needs. Bring in at least two other insurance providers, as well as your current provider. The frequency of the review will be driven by changes in your business, the stability of your current insurance provider, and the need to understand the evolving landscape of business liabilities. A review will keep your premiums competitive, as well as help you learn about coverage holes in your current policy.

4. Identify evolving coverage risks. As the business climate evolves, so should your insurance coverage. Think about what's on the horizon. Who would have anticipated the need to cover cyber attacks and identity theft 10 years ago?

5. Review safety plans and company policies. This goes hand-in-hand with a business insurance review. Make sure your team is adhering to established employment and operations policies. Getting an insurance claim approved and maintaining reasonable premiums often depend on specific factors you can reinforce through these policies.
Finding the right level of coverage for the right price is possible, but it takes some preparation and planning. Invest some time now to review your insurance policies to save a lot of potential pain and money down the road.

As always, should you have any questions or concerns regarding your tax situation please feel free to call.
March 2019
Tax season is in full swing. Early reports from the IRS indicate that, on average, refund amounts are down compared to last year. If this is you, the first article lays out some reasons for the change. This issue also includes a warning to business owners to file their taxes on time, and tips to keep your monthly bills in check.

Call if you would like to discuss how any of this information relates to you. If you know someone that can benefit from this newsletter, feel free to send it to them.

This Month
March 15:
Due date for partnership and S corporation tax returns (Forms 1065, 1120S)
March 17:
St. Patrick's Day
Reminders;
Daylight Saving time begins Sunday, March 10
Businesses: File on Time or Pay the Price!

March 15 is the tax-filing due date for calendar year S-corporations and partnerships. While this filing deadline does not require making a tax payment, missing the due date could cost you a hefty penalty.

The penalty

The penalty is calculated based on each partial month the tax return is late multiplied by each shareholder or partner. So a tax return filed 17 days late with no tax due could cost a married couple who jointly own a small S-corporation $800 in penalties!*

Take action

Here are some ideas to help you avoid penalties:

• File on time. If you are a partner or shareholder of an S-corporation or partnership, file your company's tax return on or before March 15. In addition to the penalties, filing late shortens the time you have to file your individual tax return and pay the taxes due by April 15.

• Consider an extension. If you cannot file the tax return in time, file an extension on or before March 15. An extension gives you six months to file and you do not owe the tax until your Form 1040 tax return due date of April 15.

• Your personal tax return may be delayed. Do not file your Form 1040 tax return until you receive all your K-1s from each of your S-corporation and partnership business activities. Be prepared — If the business files an extension, it's possible you may need to extend your personal tax return while you wait for the K-1. This does not extend the due date for paying taxes owed.

• Challenge the penalty. While you may not be successful, it doesn't hurt to try to abate the penalty. This is especially true if you file and pay your personal taxes on time. Kindly remind the US Treasury it is still receiving the taxes owed to them in a timely manner.

If you haven't filed your S-corporation or partnership return for 2018, there's still time to get it done or file an extension. Please call if you need assistance.

* The penalty calculation for 2018 is $200-$210 per calendar month late, multiplied by the number of shareholders. So a S-corp or partnership return filed on April 1 is considered two months late!

7 Common Missing Tax Return Items

Want your tax return filed quickly and without error? Then double-check this list of items that are often overlooked. These missing items often cause delays in getting your tax return filed:

1. Forms W-2 and 1099. Using last year's tax return as a checklist, make sure all your W-2s and 1099s are received and applied to your tax return. Missing items will be caught by the IRS mismatch program. All these forms are required to be in the mail to you on or before Jan. 31. If you are missing a form, contact the company responsible for issuing them.

2. Form 1095-A. If you have health insurance through the Health Insurance Marketplace, you will need this form to complete your taxes and potentially claim the Premium Tax Credit. The deadline for employers to distribute other versions of Form 1095 is March 4.

3. Dependent information. If you add a new dependent in 2018, provide the name, Social Security number and birth date to have them added to your tax return. If you have a dependent that shares time with someone else, discuss the plan for who is going to claim them. Your tax return cannot be filed if there is conflict in this area.

4. Cost/basis information. If you sold any assets (typically investments or real estate), you need to know the cost/basis amount to calculate your taxable capital gain. Check your investment statements to ensure that your broker includes the required information. Often times it's hard to find on the Form 1099-B summary, but it might be listed later in the statement details.

5. Schedule K-1s. As an owner of a partnership or S-corporation, you will need to receive a Form K-1 that reports your share of the profit or loss from the business activity. Because of the new qualified business income deduction (QBID), businesses are required to report more information this year. When you receive your K-1, pay special attention to box 17 (codes V through Z) for S-corporations and box 20 (codes Z through AD) for partnerships. This is where QBID information is included. Without this, you cannot file your tax return.

6. Forms or documents with no explanation. If you receive a tax form, but have no explanation for the form, questions will arise. For instance, if you receive a retirement account distribution form it may be deemed income. If it is part of a qualified rollover, no tax is due. An explanation is required to file your information correctly.

7. Missing signatures. Both you and your spouse need to review and sign the e-file approval forms before the tax return can be filed. The sooner you review and approve your tax return, the sooner it can be filed.

By knowing these commonly missed pieces of information, hopefully your tax filing experience will be a smooth one.

Oh No! Your Tax Refund is Now a Bill
If you are anticipating a nice refund this year, it may be a good idea to prepare yourself for a possible letdown. Many taxpayers will receive a smaller-than-expected refund and might even owe taxes to be paid by April 15. If this happens to you, here are some of the likely reasons:

• Higher take-home pay. Look at last year's W-2 and see how much was withheld for federal income tax. Now check this year's W-2. If it is lower, you will need a corresponding reduction in your tax obligation to get the same refund as last year. The good news? You've had more of your income available to you throughout the year. The bad news? Paying less tax each pay period can result in a lower refund or tax due at tax filing time.

• Withholding tables are not always accurate. To help employers calculate the tax to withhold from each paycheck, the IRS revised withholding tax tables in February 2018 with a forecast of the impact of new tax legislation. While the IRS did its best to apply the tax law changes to the withholding tables, it did not correctly estimate every individual tax situation. Now, according to the U.S. Government Accountability Office (GAO), as many as 30 million taxpayers may not have had adequate withholdings for 2018.

• Lower itemized deductions. If you have similar itemized deductions this year as you did last year, they might not go as far as you think. This is because the state/property tax deduction is limited to $10,000 and many other itemized deductions are no longer available. While standard deductions are now higher, those with unreimbursed employee expenses, or those living in high-tax states could see a negative impact on their tax obligation. These changes coupled with the repeal of the personal exemptions could lead to a surprising change in your tax obligation for 2018 and going forward.

• Your state takes a different path. Depending on the degree to which a state incorporates recent federal tax changes, you could see a big tax surprise on your state tax return. As a result, the nonprofit Tax Foundation is anticipating that many taxpayers will experience an increase in state taxes for 2018.

• Good news for families with kids. The expansion of the Child Tax Credit will help offset the loss of the personal exemptions and could actually create a nice refund. The credit is now double at $2,000 per child and the income limit is raised to include most taxpayers.

With the uncertainty regarding whether you will receive a refund, hold off on major purchases and plans until your tax return is finalized. If possible, create a cash cushion to lessen the financial burden on you and your family. This is especially true if your withholdings are lower than last year.

Hints to Eliminate Monthly Bill Creep

Paying bills is inevitable, but paying too much is not. Are you aware of all the services you are paying for every month? Here are some tips to help you get a handle on your recurring monthly expenses:

• Investigate your recurring services. Start by taking stock of every service you are 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 two 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 are 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 often times they will 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.

February 2019
This Month
February 14: 
Valentine's Day
February 18:
Presidents' Day
Reminders:
-Receive all 1099s and W-2s
-Set up tax appointment
-Rebalance investment portfolios
All systems go for tax season! Filing season kicked off on Jan. 28 and tax returns are pouring into the IRS. Now that the IRS is accepting tax returns, fraudsters are actively seeking out taxpayer information to file fake returns and claim fraudulent refunds. Please review the tips for how to protect yourself from these scammers. This issue includes remedies for common financial mistakes, tax-free benefit ideas you can offer your employees, and five things every high school senior should know.

Call if you would like to discuss how any of this information relates to you. If you know someone that can benefit from this newsletter, feel free to send it to them.

How to Correct 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 is wrong with your finances. When a negative financial event hits, don't let it take you down. Here are some common mistakes and steps to remedy each situation:

• You overdraw your 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 often times 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.

• You miss a credit card payment. Make as big a payment as possible as soon as you realize you missed it. Time is of the essence with late credit card payments - the longer it goes, the more serious the consequences. Then call the credit card company to discuss the missed payment. You might be able to get a refund of the late fees, and perhaps a reversal of the interest charge.

• You forget to file a tax return. 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 on a payment plan if need be. 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.

• You lose your wallet. Start by calling all of your debit card providers, then your bank and the credit card companies. Next, set up fraud alerts with the major credit reporting companies and get a new driver's license. Finally, if you think it was stolen, file a report with the police.

• You miss an 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 your penalty.

Remember, mistakes happen. When they do, stay calm and walk through the steps to correct the situation as soon as possible.

Tips to Protect Yourself From Tax Scams

Too many people downplay the threat of identity theft because it hasn't been witnessed or experienced firsthand. This false sense of security can leave you exposed, especially during tax season. Here are some tips to keep your identity safe from scammers:

1. Be naturally suspicious. Understand that there are people out there trying to get your information, and others willing to pay for it. With that knowledge, be suspicious of anyone asking for personal information - especially your Social Security number (SSN). Even when a known vendor asks for your SSN, ask what they will be using it for and refuse most requests unless you deem it necessary.

2. File your tax return as soon as possible. A popular tax scam is to file a fake tax return and deposit the refund into the thief's account, all before you get the chance to file your own return. You close the door on scammers once your tax return is filed with the IRS.

3. Shred (don't just crumple) your documents. Get in the habit of shredding all paperwork before it's thrown out to keep personal information from falling into the wrong hands. If you don't own a shredder, contact your bank or other local community services as they often offer free shredding services on specific days.

4. Keep your Social Security card safe. Only carry your Social Security card with you when it's needed for a specific purpose. Your wallet or purse is not a good permanent spot for your card. Any criminal would have a treasure trove of personal data if it were to get lost or stolen along with your driver's license and credit cards.

5. Periodically check your credit reports. The three major collection agencies (Experian, Equifax and TransUnion) are legally required to provide you with a free credit report each year. Take advantage of this service and review the reports. Correct any errors and use this report to monitor your accounts for any potential identity theft.

Be smart when handling your personal information. Don't get caught off guard by identity theft, especially by being careless. If you think you are a victim of a tax scam, alert the IRS right away and go to identitytheft.gov for more information.

2019 State Business Tax Climate Rankings

The tax climate for businesses varies dramatically depending on where your business is located. State business environments are constantly shifting; some states readily enact changes made at the federal level, while others do not.

Each year the non-profit Tax Foundation organization announces a ranking of tax burdens for businesses. The results of its 2019 ranking are noted here:

State                                 Rank         State                                        Rank
Alabama                            39         Montana                                         5
Alaska                                  2         Nebraska                                      24
Arizona                              27          Nevada                                           9
Arkansas                           46   New Hampshire                                  6
California                          49      New Jersey                                      50
Colorado                            18       New Mexico                                   25
Connecticut                      47         New York                                      48
Delaware                           11     North Carolina                                  12
Florida                                4      North Dakota                                    17
Georgia                             33             Ohio                                            42
Hawaii                              38        Oklahoma                                       26
Idaho                                21           Oregon                                             7
Illinois                              36      Pennsylvania                                    34
Indiana                             10      Rhode Island                                    37
Iowa                                  45     South Carolina                                  35
Kansas                              28      South Dakota                                     3
Kentucky                          23        Tennessee                                       16
Louisiana                         44            Texas                                            15
Maine                               30             Utah                                              8
Maryland                         40         Vermont                                         41
Massachusetts                29          Virginia                                          22
Michigan                          13       Washington                                     20
Minnesota                       43     West Virginia                                     19
Mississippi                      31         Wisconsin                                       32
Missouri                           14         Wyoming                                          1

Note: A rank of 1 is best, 50 is worst. Rankings to not average to the total. States without a tax rank equally as 1. D.C.'s score and rank do not affect other states. The report shows tax systems as of July 1, 2018 (the beginning of the Fiscal Year 2019).

Source: Tax Foundation - https://taxfoundation.org/state-business-tax-climate-index-2019/

The 10 best business tax states in this year's index are:
1. Wyoming
2. Alaska
3. South Dakota
4. Florida
5. Montana
6. New Hampshire
7. Oregon
8. Utah
9. Nevada
10. Indiana

Most of the above states are favorable for businesses because they lack one of the common tax revenue sources. Some states lack corporate taxes while others have no sales tax or individual income taxes. Indiana is unique in that it has all the major tax classifications but at lower rates than most other states.

The 10 worst business tax states in this year's index are:
41. Vermont
42. Ohio
43. Minnesota
44. Louisiana
45. Iowa
46. Arkansas
47. Connecticut
48. New York
49. California
50. New Jersey

The common themes within these non-friendly business tax states are high tax rates with complex tax codes. Iowa and Arkansas dropped into the bottom 10 replacing Rhode Island and Maryland this year.

Want to learn more? The full study is available at www.taxfoundation.org.

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

Major Life Changes Ahead? Read This!

Too often major life decisions have tax implications attached to them. For the unwary, this can create a fairly large and unexpected tax bill. Here are four examples of major life changes that can have complicated tax implications:

• Changing jobs. Whether it's a new, exciting opportunity or a result of being laid off, a job change is going to affect your tax obligation. The termination of your previous job likely adds additional taxable income in the form of accrued vacation or a severance package. Review how your former employer handles tax withholdings, especially for big payouts. Your new job also brings new tax implications with a new salary, new benefits and possibly different taxing jurisdictions if you also move to a new location.

• Selling your house. When selling a house or other residential property, the first thing to determine is whether it's your primary residence. If so, the IRS provides an exemption from tax for up to $250,000 ($500,000 for joint couples) of the gain realized from the sale of your home as long as you lived in it for at least two of the previous five years. Any gain above the exemption is subject to capital gains tax. If the property you are selling is not your primary residence, capital gains tax applies, and you also have to deal with other more complicated tax code issues.

• Adding a second job. The extra money you earn when adding a second job or business also brings extra taxes. How much additional tax this second income creates depends on your situation. Employment status, type of business, and how it relates to your other tax activities need to be considered. The extra income alone can send you into a higher tax bracket.

• Deciding when to retire. Your retirement plans and timing of retirement plan distributions play a big role in how much tax you will pay on your retirement earnings. For example, with traditional IRAs, there are early withdrawal penalties before you reach age 59½ and required minimum distributions after reaching age 70½ years old. For Social Security, collecting benefits early means less in monthly benefits and potentially a higher tax obligation if you have additional earnings. Each source of retirement income has its own set of taxation rules which can create a very complicated tax environment.

When a big life decision is on the horizon, go in with your eyes open to the potential tax implications. Carefully weigh all your options and seek help before you act.

January 2019 
The new year is upon us! As you finish cleaning up the champagne glasses and confetti, now is the time to start thinking about your tax preparation plan. This issue is packed with useful information including tips to receive a faster refund. In addition, there are ideas to manage cash flow for your business and the updated mileage rates for travel.

Call if you would like to discuss how any of this information relates to you. If you know someone that can benefit from this newsletter, feel free to send it to them.

This Month
January 1:
New Year's Day
January 15th:
4th Quarter Estimated Payments Due
January 21st:
Martin Luther King Jr. Day
Start tax planning for the new year:
- Adjust withholdings
- Organize filing records
- Schedule tax consultation
- Rebalance investment portfolio
Every Business Needs Cash!
5 keys to better cash management


Focusing solely on sales and profits can create a surprise for any business when there is not enough cash to pay the bills. Here are five key principals to improve your cash management.

1.Create a cash flow statement and analyze it monthly.The primary objective of a cash flow statement is to help you budget for future periods and identify potential financial problems before they get out of hand. This doesn't have to be a complicated procedure. Simply prepare a schedule that shows the cash balance at the beginning of the month and add cash you receive (from things like cash sales, collections on receivables, and asset dispositions). Then subtract cash you spend to calculate the ending cash balance. If your cash balance is decreasing month to month, you have negative cash flow and you may need to make adjustments to your operations. If it's climbing, your cash flow is positive.
Bonus tip: Once you have a cash flow statement that works for you, try to automate the report in your accounting system. Or even better, create a more traditional cash flow statement that begins with your net income, then make adjustments for non-cash items and changes in your balance sheet accounts.

2.Create a history of your cash flow.Build a cash flow history by using historical financial records over the course of the past couple of years. This will help you understand which months need more attention.

3.Forecast your cash flow needs.Use your historic cash flow and project the next 12 to 24 months. This process will help identify how much excess cash is required in the good months to cover payroll costs and other expenses during the low-cash months. To smooth out cash flow, you might consider establishing a line of credit that can be paid back as cash becomes available.

4.Implement ideas to improve cash flow.Now that you know your cash needs, consider ideas to help improve your cash position. Some ideas include:

o Reduce the lag time between shipping and invoicing.
o Re-examine credit and collection policies.
o Consider offering discounts for early payment.
o Charge interest on delinquent balances.
o Convert excess and unsold inventory back into cash.

5.Manage your growth.Take care when expanding into new markets, developing new product lines, hiring employees, or ramping up your marketing budget. All require cash. Don't travel too far down that road before generating accurate cash forecasts. And always ask for help when needed.

Understanding your cash flow needs is one of the key success factors in all businesses. If your business is in need of tighter cash management practices, now is the perfect time to get your cash flow plan in order.


Tips for a Faster Refund

As the tax filing season approaches, there are steps you can take now to speed up the filing process. The faster your return is filed, the faster you get your refund. Even if you end up owing money to the IRS, knowing the amount due sooner gives you more time to come up with the funds needed to pay your tax bill. Here are things you can do now to get organized:

1. Look for your tax forms. Forms W-2, 1099, and 1098 will start hitting your mailbox. Look for them and get them organized. Create a checklist of the forms to make sure you aren't missing any.

2. Don't wait for Form 1095s. Once again, proof of health insurance coverage forms are delayed. The deadline for companies to distribute most Form 1095s to employees is pushed back to March 4. The IRS is OK with filing your return prior to receiving the proof of insurance form as long as you can provide other forms of proof. Remember, 2018 is the last year of penalties if you do not have adequate insurance coverage.

3. Finalize name changes. If you were recently married or had a name change, file your taxes using the correct name. File your name change with the Social Security Administration as soon as possible, but be aware of the timing with a potential name conflict with the IRS.

4. Collect your statements and sort them. Using last year's tax return, gather and sort your necessary tax records. Sort your tax records to match the items on your tax return. Here is a list of the more common tax records:

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

If you are not 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.

5. 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.

6. Coordinate your deductions. If you and someone else may 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.

While you are organizing your records, ride the momentum to start your filing system for the new year. Doing so will make this process a breeze this time next year!

IRS Announces 2019 Mileage Rates

Mileage rates for travel are now set for 2019. The standard business mileage rate increases by 3.5 cents to 58 cents per mile. The medical and moving mileage rates also increase by 2 cents to 20 cents per mile. Charitable mileage rates remain unchanged at 14 cents per mile.

2019 Standard Mileage Rates

Standard Mileage Rates
Mileage                                                                                Rate/Mile
Business Travel                                                                  58 cents
Medical/Moving                                                                 20 cents
Charitable Work                                                                 14 cents


Here are 2018 rates for your reference, as well.

2018 Standard Mileage Rates

Standard Mileage Rates

Mileage                                                                             Rate/Mile
Business Travel                                                              54.5 cents
Medical/Moving                                                             18 cents
Charitable Work                                                             14 cents

Remember to properly document your mileage to receive full credit for your miles driven.

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

Taking a Home Office Deduction
A great tax reduction idea, if done right!

Cloud-based applications, extensive communication channels, and other new technologies make it easier to run your business out of your home. If you qualify, many home business expenses are deductible. Think you might qualify? You must first pass these tests.

1. Trade or business use test. To qualify for business use of your home you must use part of your home for a qualified trade or business. This profit seeking activity must not be a hobby in the eyes of the IRS.

2. Exclusive use test. You must use part of your home exclusively for your business activity. Blending personal use within the same space as your business activity can disallow the business use of home deductions, however, there does not need to be a permanent barrier between this space and the rest of the house.

3. Regular use test. In addition to having a qualified business activity in an exclusive area of your home, you must also use it "regularly" for your business activity. The IRS applies judgment in this area to determine the facts and circumstances around what it deems to be regular use.

4. Principal place of business test. To deduct your home office expenses, the home location must also be your principal place of business. That does not mean there cannot be other business locations, just that your home office must be your primary location. You might also have multiple business activities. In this case, you could meet the test for one of your businesses to qualify to take the deductions. With multiple locations, the considering factors are:

o The relative importance of the activities performed at each location
o The amount of time spent at each location
o The primary place used exclusively and regularly for administrative or management activities
o Whether there are other fixed locations for business use

Types of deductible expenses

This chart from the IRS gives some direction on the types of expenses that are deductible. As always, proper substantiation is required to take the deduction, so keep all receipts and statements in an organized fashion.



Sound confusing? Perhaps. If the additional work of tracking specific expenses is too much to handle, a simplified home office deduction calculation is also available to small businesses to lower their tax bill. Please call should you need help in navigating this part of the tax code.
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