FEATURED POST

Nick L.

Mapping Out Your Future with a Financial Plan
Just like a map or a GPS is needed for someone driving a car on a long trip, a financial plan is useful for anyone wondering about their financial future.  A financial plan lets us know if we are heading in the right direction, for example north instead of south.  Much like a long journey, life will have many twists, turns and a few unexpected bumps in the road.  However, with a well-planned route, we can have a clear idea of whether we are heading in the direction of our destination. What is a Financial Plan? A financial plan is a document that evaluates cash flow, assets, goals, and brings the information together in a document that predicts how much money and income you will have in the future. This document will be used to determine if your current strategy will accomplish your goals, or if you need a different one. Who can benefit from a financial plan? Financial plans are useful for people of all ages. A financial plan looks at money that is coming in (wages for most people), assets that you have saved so far, and what you are currently saving. This along with other factors helps to plan a path for your financial future.  This could be saving for a large purchase, paying off debt, or saving for the future (children’s education or retirement).  Financial plans are also helpful for people already in retirement as they can be used to help identify a strategy for creating retirement income, spending down assets, or planning to leave them to heirs. To prepare a financial plan your financial planner will need to gather some information from you. You will likely need to bring the following: Recent paystubs Last year’s tax return Statements for any retirement or investment accounts that you have Information on any pensions that you may have Social Security Statements (get yours at ssa.gov/myaccount ) More complex plans may require information about insurance and/or legal work Your planner will ask some questions to get to know you and find out what is important to you. A good planner will be interested in not just how much money you have, but also in what you would like to accomplish with your money. This conversation along with the data you bring to your appointment will help your planner to craft a financial plan that is specific to your goals. Your planning process will likely consist of several meetings. Costs are generally dependent on the complexity of your plan, and it is even possible that your advisor will provide some basic planning at no cost. Life will continue to change over time, for this reason it is important to revisit your financial plan with your advisor every so often to account for any detours or bumps along the road of life.  Financial plans are working documents that need to be adjusted as circumstances change. You should expect to update your financial plan several times during your working years. Generally, this will be every few years or when a major life change occurs. If you would like to find out more about having your personal financial plan prepared, contact us to set up your no obligation consultation today. Kate Pederson Investment Advisor Representative & Tax Preparer  Kate joined Advisors Management Group in December 2017. Prior to joining the firm, she worked in manufacturing and healthcare during her career as a financial analyst. Advisors Management Group, Inc. is a registered investment adviser whose principal office is located in Wisconsin.   Opinions expressed are those of AMG and are subject to change, not guaranteed, and should not be considered recommendations to buy or sell any security.  Past performance is no guarantee of future returns, and investing involves multiple risks, including, but not limited to, the risk of permanent losses.  Please do not send orders via e-mail as they are not binding and cannot be acted upon.  Please be advised it remains the responsibility of our clients to inform AMG of any changes in their investment objectives and/or financial situation.  This commentary is limited to the dissemination of general information pertaining to AMG’s investment advisory/management services.  Any subsequent, direct communication by AMG  with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides.  A copy of our current written disclosure statement discussing our advisory services and fees continues to remain available for your review upon request.
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Category: Taxes

20 Jun 2023

Nick L.

Pay Stubs & Tax Withholding 101

If you are like most Americans, you no longer or perhaps have never received your pay in the form of a paper check.  American Payroll Association estimates that while some people are still paid with paper checks, an overwhelming 93% of employees receive their paycheck directly deposited. Additionally, some employees use payroll cards and reloadable prepaid debit cards to receive their pay. The shift from old school paper checks to direct deposit has caused us to be less aware of all the deductions that come off the top of our checks. It is this unawareness that can cause issues in the long term. For most people who get paid through direct deposit, pay stubs are available through an employee portal. For those who are paid a salary, the amounts won’t change much from check to check, however it is important to make sure that tax is being withheld appropriately and deductions for benefits such as health insurance and retirement savings are accounted for. You should also make sure that vacation, sick, and personal days are both accruing correctly and being applied correctly when you take them. For those paid an hourly rate, the same applies, but additionally you should verify hours worked and hours paid match and that any overtime or holiday hours are paid at the appropriate rate. Those paid commissions should not only review their paystubs for the basics, but they should also audit their sales and make sure that all commissions are paid out appropriately. Understanding Tax Withholding In 2017, the Tax Cuts and Jobs Act became law which removed personal exemptions while increasing the standard deduction and expanding child tax credits. Because of the significant amounts of change, the W-4 that was familiar to most of us was replaced with an updated W-4. The new form differs from past forms in that it does not require you to figure out your tax exemptions. Some employers will require you to fill out a new W-4 annually, however even if they don’t, it is a great idea make sure you are withholding enough regularly. You probably will be prompted to look at if you got a surprise at tax time. If you have too large of a refund, you may need to lessen your withholding. If you owed a large amount, you would want to talk to your tax preparer to understand the root of your tax bill. While it is possible that you may have had something out of the norm happen within the year, you may have had a change to your tax situation. Marriage, divorce, death, babies, and kids growing up can cause the need for you to adjust how much you are withholding from your paycheck. If your income has changed, you may also need to check your withholding. Perhaps you took a new job, got a raise, or took a second job. Note that each job will come with its own W-4. If you have income from other jobs, have a spouse with income or have other sources of income, you may need to withhold tax differently than what the W-4 indicates. The new W-4 has worksheets for those situations. The case for being proactive Because our paystubs are out of sight, they are often out of mind until we have neglected them long enough to cause a big hassle. It only takes a small issue to snowball into a much larger one. Taking the time to review your paystub regularly can really help you in the long run. If you have questions about filling out your W-4 or how much you need to withhold, your payroll professional can be a great resource. If they are unsure how to help you, they may direct you to https://www.irs.gov/individuals/tax-withholding-estimator. This can be a great option to help you figure out how much tax you should withhold, however many people find this calculator to be difficult. Also, missing or incomplete information can lead you astray. Your tax professional can help you to be sure that you are on the right track as well as help you to increase your tax efficiency and help you to understand how changes in tax law affect you.   Rebecca Agamaite Investment Advisor Representative  Rebecca joined the firm in 2011 as an Investment Advisor Representative. In this role, she works with clients to manage their investment assets and help them obtain their financial objectives. Rebecca brings a great deal of experience to the team having worked for several years at Marshall & IIsley Bank and MetLife. She earned a Masters of Business Administration degree (with an emphasis on finance) from Concordia University. Advisors Management Group, Inc. is a registered investment adviser whose principal office is located in Wisconsin.   Opinions expressed are those of AMG and are subject to change, not guaranteed, and should not be considered recommendations to buy or sell any security.  Past performance is no guarantee of future returns, and investing involves multiple risks, including, but not limited to, the risk of permanent losses.  Please do not send orders via e-mail as they are not binding and cannot be acted upon.  Please be advised it remains the responsibility of our clients to inform AMG of any changes in their investment objectives and/or financial situation.  This commentary is limited to the dissemination of general information pertaining to AMG’s investment advisory/management services.  Any subsequent, direct communication by AMG  with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides.  A copy of our current written disclosure statement discussing our advisory services and fees continues to remain available for your review upon request.

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20 May 2020

Advisors Management Group

8 Steps to Appeal Your Property Tax Bill

Home values rose across the country in 2019, which means many homeowners' property taxes are now going up, too. The taxes can hit particularly hard in states with the highest effective property tax rates -- New Jersey, Illinois, Texas, Vermont and Connecticut -- now that federal deductions for state and local taxes are capped at $10,000. If you’ve lost your job or suffered other financial setbacks because of the coronavirus pandemic, check with your county or other jurisdiction for property-tax relief. A number of states and counties have extended deadlines for property tax payments or offered other forms of relief. For example, several counties in Washington have delayed the first of two annual property tax payments from April 30 to June 1. West Virginia extended the deadline for payments for the second half of 2019 from April 1 to May 1. Iowa has suspended interest and penalties on late property tax payments. If you’re unable to pay on time and your state or county hasn’t extended the deadline, contact your property tax office. You may qualify for a program that will waive fees or interest on late payments. If your property tax bill has increased significantly, you may have grounds for an appeal, particularly if the increase seems out of line with overall appreciation in your area. Most jurisdictions give you 90 days after you receive a new assessment to appeal, although some close the appeals window after 30 days, says Pete Sepp, president of the National Taxpayers Union. Some lawyers handle property tax appeals on a contingency basis, but most homeowners can appeal on their own, Sepp says. Plenty of property owners challenge their assessments each year, and between 20% and 40% of them win lower assessments and lower property tax bills. The following steps will show you the way to success.   Step 1: Know the Rules Schedules vary, but local governments commonly send assessment notices to homeowners in the first few months of the year. As soon as you get yours—or even before—check the deadline for challenging the value. You may have just a few weeks. And be sure you know how your locality assesses property. Some set the tax assessment at a percentage of market value—80%, for example—so don't be smug if you get a $90,000 assessment on a home you think is worth at least $100,000.   Step 2: Catch a Break When you get your property tax bill, check it for your tax rate, assessment figures and payment schedule, and make sure that you're getting the tax breaks you deserve. Some states allow anyone who owns and lives in a primary home to shield a portion of its value from taxation. You may be eligible for credits based on your income or status as a senior citizen, veteran or disabled person. In Florida, for example, all homeowners are eligible for a homestead exemption of up to $50,000; those 65 and over who meet certain income limits can claim an additional $50,000. Illinois Gov. J.B. Pritzker recently signed legislation that will make it easier for seniors in Cook County—which includes Chicago and is the state's most populous jurisdiction—to apply for a property tax break of up to $8,000 a year. Rebates and other property tax breaks aren't automatic: you usually have to apply for them and show proof of eligibility. Contact your state's department of taxation or visit its Web site to see what breaks are available to you.   Step 3: Set the Record Straight Check your property's record card, which you'll find at your assessor's office or possibly on its Web site. This is the official description of your house, and if you see an outright error—indicating four bedrooms and three-and-a-half bathrooms for your two-bedroom bungalow, for example—the assessor may fix the problem on the spot, reduce the assessed value and your tax bill. That'll save you the trouble of a formal appeal.   Step 4: Size Up the Neighbors We'd never tell you to keep up with the Joneses, but comparing your property to similar ones in your neighborhood will determine whether you have a solid case. Pull up property cards of several homes of similar age and square footage and with the same number of bedrooms and bathrooms to see how their assessments line up with yours.   Step 5: Build Your Case If you find that your assessed value is considerably higher than several similar homes, you may have grounds for appeal. But even if the assessment falls into the middle of the pack, it's not necessarily fair. Maybe your house has a leaky basement or lousy grading that doesn't allow you to have a garden. The assessment should be based on the market value of your home; if your place has issues that would turn off buyers, now's the time to own up to them   Step 6: Fight City Hall The process varies by locality, but you'll likely send your appeal and your evidence—data on comparable properties, blueprints, photographs, repair estimates—to the assessor for review. You should get a verdict within a couple of months. If you're dissatisfied, take your case to the appeals board and put your persuasive skills to work. Don't whine, and save your opinions on politics and tax rates for elected representatives who vote on those matters.   Step 7: Enlist Troops If you don't have time, or the stomach, to do battle yourself, get a hired gun to do the legwork for you. A professional appraiser can provide the strongest evidence of your property's worth. If your community allows outside appraisals—and if you're willing spend at least $250 -- find an appraiser with national certification, such as through the Appraisal Institute or the American Society of Appraisers. Don't fall for solicitations from law firms or other services saying they'll assist you in return for a high percentage of the savings on your bill—it's not worth the cost.   Step 8: Reap the Rewards If you need added incentive to bring a skeptical eye to your real estate appraisal, remember this: A successful appeal is truly the gift that keeps on giving, year after year. Raise a toast to your success.   Source: Kiplinger

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05 Dec 2019

Advisors Management Group

Here’s Everything You Need to Know About Your 2020 Taxes

Get out your pencils and calculators: The IRS has released a breakdown of what’s ahead for 2020 taxes. Taxpayers who’ve been paying close attention will notice that the Tax Cuts and Jobs Act overhauled the tax code. Those sweeping changes include a higher standard deduction — it’s now $12,400 for singles and $24,800 for married joint filers in 2020. Following the overhaul, individual income tax rates also went down, and personal exemptions were eliminated. For the 2020 tax year, the IRS tweaked the individual income tax brackets, adjusting them for inflation. See below for your new bracket. The additional standard deduction for older taxpayers and those who are blind are still available. Filers who are blind or aged 65 and over can claim $1,300. Two married filers who are both over 65 can claim $2,600, unchanged from 2019. Single filers who are blind or over 65 are eligible for a $1,650 additional standard deduction. This is up $50 from 2019. Your Retirement Savings The taxman is also allowing you to save a few more dollars in 2020 taxes. The IRS has raised the employee contribution limit for 401(k), 403(b) and most 457 plans to $19,500, up from $19,000 in 2019. If you’re 50 or older, you can sock away another $6,500 in that workplace retirement plan. That’s up from $6,000 in 2019. The contribution limit for individual retirement accounts, whether traditional or Roth, is holding steady at $6,000, plus another $1,000 for savers 50 and over. The IRS limits high-income earners’ ability to make direct contributions to Roth IRAs — accounts in which you can save after-tax dollars, have the money grow tax-free and use it in retirement free of taxes. In 2020, if your adjusted gross income exceeds $124,000 and you’re single ($196,000 for married couples filing jointly), you won’t be able to make a full contribution directly to a Roth IRA. Instead, those savers might consider using a strategy known as the “backdoor Roth,” where they make a nondeductible contribution with after-tax dollars to a traditional IRA and then convert it to a Roth. Health Care Savings If you choose a high-deductible plan during the open enrollment season, you might have access to a health savings account. These accounts allow you to put away pre-tax or tax-deductible money and have it grow free of taxes. You can take a tax-free withdrawal to cover qualified health expenses. In 2020, you can save up to $3,550 if you’re an individual with self-only health coverage. That’s up from $3,500 in 2019. Account-holders with family plans can save up to $7,100 in this account (up from $7,000 in 2019). HSAs differ from health-care flexible spending accounts primarily in that you can rollover the HSA balance from one year to the next. Health-care FSAs generally must be used by the end of the plan year. The IRS also bumped up the amount you can save in a health-care FSA: It will be $2,750 in 2020, up from $2,700 in 2019. Your Estate and Gift Taxes The Tax Cuts and Jobs Act also nearly doubled the amount that decedents could bequeath in death — or gift over their lifetime — and shield it from federal estate and gift taxes, which are 40%. Before the tax overhaul, this so-called gift and estate tax exemption were $5.49 million per person. For 2020 taxes, the lifetime gift and estate tax exemption will be $11.58 million per individual, up from $11.4 million in 2019. Finally, the annual gift exclusion — the amount you can give to any other person without it counting against your lifetime exemption — will hold steady at $15,000 for 2020. Source: CNBC

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29 Oct 2019

Advisors Management Group

State Taxes on Retirees Differ by Types of Retirement Income

Where you retire can have a big impact on your tax bills for Social Security, pensions, IRAs, 401(k)s and other income. Depending on which state you retire in, your state income tax bill could vary by thousands of dollars. But it’s not just a state’s tax rate that matters. In fact, the type of income you receive in retirement often has a greater impact on your state tax liability than the tax rate you pay. That’s because each state has its own way of taxing certain types of retirement income. Here’s a look at how states tax two common forms of retirement income: Social Security benefits and retirement plan payouts.  Taxes on Social Security benefits. While Uncle Sam taxes up to 85% of Social Security benefits, most states don’t tax Social Security benefits at all. Seven states—Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming—don’t tax Social Security benefits because they don’t have an income tax. New Hampshire and Tennessee only tax interest and dividends. Social Security benefits are exempt from tax in the District of Columbia and 28 states: Alabama, Arizona, Arkansas, California, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Virginia and Wisconsin. That leaves 13 states where a portion of Social Security benefits may be taxable. New Mexico, Utah, and West Virginia currently tax Social Security benefits to the same extent they are taxed on the federal return. However, West Virginia will start phasing out its tax on Social Security benefits in 2020. Taxation of Social Security benefits in the remaining states—Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, Rhode Island, and Vermont—depends on your income and, in many cases, on your filing status. Some of these states fully exempt Social Security for taxpayers under certain income thresholds. In Kansas, for example, Social Security benefits are completely exempt from state tax if your federal adjusted gross income (AGI) is $75,000 or less, regardless of your filing status. Starting in 2019, single North Dakota residents can fully exclude Social Security benefits from state taxable income if their federal AGI is $50,000 or less, while married residents filing a joint return can claim the exclusion with a federal AGI of $100,000 or less. Missouri offers partial exemptions for joint filers with federal AGI above $100,000 and all other filers with AGI over $85,000, while Missouri taxpayers with income below these thresholds can get a full state tax exemption. The remainder of the states have their own formulas for determining whose Social Security benefits are taxed and to what degree. Retirement plan payouts. The state taxation of payouts from retirement plans—pensions, IRAs, 401(k)s and the like—is more complicated. The states without an income tax or that just tax interest and dividends don’t tax retirement plan payouts. For the other states, it’s a mixed bag. Mississippi and Pennsylvania are the most generous. They generally don’t tax any retirement income. On the flip side, California, D.C., Nebraska, and Vermont are some of the stingiest—they offer little or no tax breaks for retirement plan payouts. Many of the states in between offer credits or deductions ranging from a few hundred bucks to tens of thousands of dollars. Georgia offers the largest tax break—a $65,000 retirement-income exclusion for anyone age 65 and older (couples can shelter up to $130,000). In some cases, the type of retirement plan involved makes a difference. Kansas, for example, exempts income from government pensions, but it taxes private pension payouts. Alabama taxes defined-contribution plan distributions but not private pension payouts. And starting in 2019, North Dakota exempts military retirement pay but not other retirement plan payouts. Source: Kiplinger

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15 Aug 2019

Advisors Management Group

Dealing with tax debt?

Here are 5 tips to set things right with the IRS Death and taxes ... you know what the deal is. You can’t avoid either of them. If you have a big tax bill that you can’t pay, life can seem pretty bleak. While the number of tax liens annually filed by the IRS against taxpayers has fallen by more than 50 percent since 2010, there were more than 14 million open tax-debt cases against individuals and businesses heading into 2018, according to the IRS data book. Despite one of the longest-running economic expansions on record over the last decade, millions of Americans continue to struggle to pay their taxes. If you’re in that boat, however, it is not the end of the world. There are steps you can take to reduce the impact of unpaid taxes on your life, credit and financial well-being. Here are five tips to lessen that burden. Tip 1: Don’t ignore the problem. The IRS will not. Even if you can’t pay what you owe, file your return on time or, if that’s not possible, file for an extension. The late filing penalty is 5 percent of the tax owed per month up to a maximum of 25 percent of the balance. There is also an underpayment penalty of 0.5 percent to 1 percent per month of the balance owed, also up to 25 percent. If you don’t file your return or make any payment on your obligation, your tax debt will grow rapidly. “The IRS is unlike any other creditor,” said John Heath, directing attorney for Lexington Law, which provides credit repair services for individuals. “When you consider the penalties involved, they can far outstrip the interest rate you pay on your credit card. “The IRS should be first on your list to pay if you have issues with other creditors.” Tip 2: Be realistic about your situation. The IRS rarely forgives tax debts. Form 656 is the application for an “offer in compromise” to settle your tax liability for less than what you owe. Such deals are only given to people experiencing true financial hardship. If you or your family have had catastrophic health-care expenses or you’ve lost your job and have poor prospects for generating income in the future, you may qualify. It doesn’t happen often. “Tax forgiveness is intended for people truly struggling with a tax burden,” said Miron Lulic, CEO of SuperMoney, a financial services comparison website for consumers. “People have to be realistic with themselves. “If you have assets and are making significant income, you won’t get tax relief.” Tip 3: Owe less than $10,000? Handle it yourself. How big is the balance? If it’s less than $10,000, you’re probably capable of handling the matter yourself rather than paying someone to help you deal with the IRS. Form 9465, the IRS application for an installment payment plan, can be filed online. The service will automatically agree to such a plan for any taxpayer who owes less than $10,000. The plans typically allow you to pay off the balance owed plus penalties and interest over a 36-month period. Tip 4: Owe $10,000-plus? Hire an attorney. If you owe more than $10,000, consider hiring a tax attorney to negotiate with the IRS. Payment plans differ, and an experienced attorney can help you get better terms. They can also help you avoid having a tax lien being assessed against you, which will damage your credit. Be careful who you hire, however. State attorneys general warn consumers regularly about tax-debt resolution scams. If someone suggests they can help eliminate interest and penalties assessed by the IRS or settle your tax debt for a fraction of what you owe, they are probably lying and almost certainly not worth the fee they will charge. Consult a resource such as the SuperMoney website, which allows consumers to compare the offers, rates, and fees of tax-relief companies and provides some background on firms’ experience and things like the number of licensed attorneys on staff. “Knowing many of these attorneys, they can provide a lot of value,” said Lulic, who formerly worked for Optima Tax Relief, a major company in the industry. “But people have to do their research and explore their options.” Tip 5: Get streamlined. The best-case scenario for taxpayers with large debts to the government is to arrange a streamlined installment agreement. As part of the Fresh Start program initiated by the IRS in 2011, taxpayers with up to $100,000 in tax debt can now qualify for such an agreement. To do so, you have to file all your past tax returns and not have entered into another installment agreement within the last five years. You also won’t qualify if you’re filing for personal bankruptcy. The benefits are significant. Taxpayers can have up to 84 months to pay the balance owed as long as the term doesn’t extend beyond the collection statute expiration date — 10 years from the date of the assessment. And the payment period may be extended beyond that if you agree to sign a waiver. You also won’t have to disclose your assets and income to the IRS. If you agree to pay via direct debit or payroll-deduction plan, the IRS will not place a tax lien on you. A big tax bill can feel like a financially and emotionally crushing burden. There is only one way to deal with it: Face the situation honestly, and develop a budget you can handle to pay it off. “If you have a tax liability you can’t afford to pay, don’t avoid the issue,” said Heath. “You can work with the IRS to deal with it.” Source: CNBC

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04 Aug 2019

Advisors Management Group

8 Steps to Appeal Your Property Tax Bill

Home values have risen across the country, which means many homeowners' property taxes are going up, too. The average annual property tax for owner-occupied single-family homes nationwide in 2017 was $3,399, an effective tax rate of 1.17%, according to Attom Data Solutions. Nine counties impose average annual property taxes of $10,000 or more. In Westchester County, New York, the average property tax is more than $17,000 a year. Now that federal deduction for state and local taxes are capped at $10,000, living in a high-tax jurisdiction has become even more expensive. If your property tax bill has increased significantly, you may have grounds for an appeal, particularly if the increase seems out of line with overall appreciation in your area. Most jurisdictions give you 90 days after you receive a new assessment to appeal, although some close the appeals window after 30 days, says Pete Sepp, president of the National Taxpayers Union. Some lawyers handle property tax appeals on a contingency basis, but most homeowners can appeal on their own, Sepp says. Plenty of property owners challenge their assessments each year, and between 20% and 40% of them win lower assessments and lower property tax bills. The following steps will show you the way to success. Step 1: Know the Rules Schedules vary, but local governments commonly send assessment notices to homeowners in the first few months of the year. As soon as you get yours—or even before—check the deadline for challenging the value. You may have just a few weeks. And be sure you know how your locality assesses property. Some set the tax assessment at a percentage of market value—80%, for example—so don't be smug if you get a $90,000 assessment on a home you think is worth at least $100,000. Step 2: Catch a Break When you get your property tax bill, check it for your tax rate, assessment figures and payment schedule, and make sure that you're getting the tax breaks you deserve. Some states allow anyone who owns and lives in a primary home to shield a portion of its value from taxation, or you may be eligible for credits based on your income or status as a senior citizen, veteran or disabled person. In Florida, for example, all homeowners are eligible for a homestead exemption of up to $50,000; those 65 and over who meet certain income limits can claim an additional $50,000. Other jurisdictions reduce a percentage of your tax bill if you meet specific criteria. While these tax breaks are valuable, they're often overlooked. For example, when Chicago increased property taxes by an average of 13% in 2016, it included a rebate program for low- and middle-income homeowners. The rebates were worth up to $200, but only about 16% of eligible homeowners claimed them. Rebates and other property tax breaks aren't automatic: you usually have to apply for them and show proof of eligibility. Contact your state's department of taxation or visit its Web site to see what breaks are available to you. Step 3: Set the Record Straight Check your property's record card, which you'll find at your assessor's office or possibly on its Web site. This is the official description of your house, and if you see an outright error—indicating four bedrooms and three-and-a-half bathrooms for your two-bedroom bungalow, for example—the assessor may fix the problem on the spot, reduce the assessed value and your tax bill. That'll save you the trouble of a formal appeal. Step 4: Size Up the Neighbors We'd never tell you to keep up with the Joneses, but comparing your property to similar ones in your neighborhood will determine whether you have a solid case. Pull up property cards of several homes of similar age and square footage and with the same number of bedrooms and bathrooms to see how their assessments line up with yours. Step 5: Build Your Case If you find that your assessed value is considerably higher than several similar homes, you may have grounds for appeal. But even if the assessment falls into the middle of the pack, it's not necessarily fair. Maybe your house has a leaky basement or lousy grading that doesn't allow you to have a garden. The assessment should be based on the market value of your home; if your place has issues that would turn off buyers, now's the time to own up to them. Step 6: Fight City Hall The process varies by locality, but you'll likely send your appeal and your evidence—data on comparable properties, blueprints, photographs, repair estimates—to the assessor for review. You should get a verdict within a couple of months. If you're dissatisfied, take your case to the appeals board and put your persuasive skills to work. Don't whine, and save your opinions on politics and tax rates for elected representatives who vote on those matters. Step 7: Enlist Troops If you don't have time, or the stomach, to do battle yourself, get a hired gun to do the legwork for you. A professional appraiser can provide the strongest evidence of your property's worth. If your community allows outside appraisals—and if you're willing spend at least $250 -- find an appraiser with national certification, such as through the Appraisal Institute or the American Society of Appraisers. Don't fall for solicitations from law firms or other services saying they'll assist you in return for a high percentage of the savings on your bill—it's not worth the cost. Step 8: Reap the Rewards If you need added incentive to bring a skeptical eye to your real estate appraisal, remember this: A successful appeal is truly the gift that keeps on giving, year after year. Raise a toast to your success. Source: Kiplinger

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16 Apr 2019

Advisors Management Group

7 Ways to Trigger an IRS Tax Audit

No one wants a visit from the Internal Revenue Service. But if you get too generous with your calculations, you may need to back up your tax return. “For individuals, it usually comes down to being too overly aggressive with tax deductions or benefits that could invite the IRS in,” says Logan Allec, a certified public accountant and owner of the personal finance site Money Done Right. In most cases, you’ll receive a request for more information if your return falls under review. In tax year 2017, seven in 10 of the agency’s return examinations were conducted by correspondence rather than in person. Still, if you receive a notice from the IRS, take it seriously. Respond quickly with the documentation that the agency requests, such as letters from charities or bank statements. “If you’re not responding or not giving what the IRS feels is adequate documentation, then it could become a full-fledged audit,” Allec says. Here’s what could trigger an audit or review: 1. Too-high deductions Certain deductions you take can’t be fudged without raising some eyebrows at the IRS. For instance, the IRS receives information on the mortgage interest you paid, so you can’t inflate that figure. Others – such as charitable contributions – are easier to overstate, since the IRS doesn’t get documentation from charities on your donations. But the agency does use statistical algorithms to make sure the deductions you claim are in line with your total income. If they’re too high, the IRS may request documentation to back up your claims. 2. Missing income If you’re tempted to "forget" to include income from a side gig or contract work, don’t. The IRS receives copies of your W-2 and 1099 forms from companies you worked for. It will match the information it has against your tax return. If that data doesn’t line up, your return will be flagged for review. 3. You have foreign accounts If you have a foreign financial account – such as a bank account, brokerage or mutual fund – you may need to report it to the IRS when you file your taxes. For single taxpayers, you must file Form 8938 if the total value of your foreign assets is more than $50,000 ($100,000 for joint filers) on the last day of the tax year or more than $75,000 ($150,000 for joint filers) at any point during the tax year. If you fail to do this, you could be fined $10,000. If you don’t file within 90 days after the IRS sends you a notice, you can be assessed an additional $10,000 for each 30-day delay, up to $50,000. 4. Earning a lot of money “Simply earning a lot of money can be a red flag for an audit,” Allec says. For instance, the IRS examined 0.5 percent of all individual returns for the 2017 tax year. The examination rate increased to 0.8 percent for non-business filers reporting $200,000 to $999,999 in income, and 4.4 percent for individual returns with $1 million or more in income. “Once you cross that $1 million income threshold, your tax return is more complex,” Allec says. “There are more places for the IRS to poke holes in.” 5. Inflated business expenses There is much wiggle room when it comes to reporting business income and deductions on Schedule C, so it can be easy to misstate – or inflate – information to your benefit. This is what the IRS looks for: Claiming more deductions than profits Reporting round numbers for income and expense values Reporting a business loss for too many consecutive years Writing off 100 percent of an item as a business expense that is often used personally, such as a car or cell phone The IRS scrutinizes cash businesses, such as taxis, bars, hair salons and restaurants along with those in the sharing gig economy like Uber or Lyft drivers, says Mark Jaeger, director of tax development at TaxAct, a tax preparation software company. “If the IRS has reason to believe you aren’t being truthful, they will start questioning things,” he says. Wrongly claiming a child If you don’t file taxes with your child’s other parent, you both can’t claim the child as a dependent. This also can become confusing if a grandparent or other relative lives with or helps support the child. While this is usually an honest mistake, it could still trigger an IRS review or letter if the same dependent is claimed twice. Generally, the child must be younger than 19 and live with you for more than six months of the year. There are exceptions for older children who are full-time students. For divorced students, use the “tie breaker rules” found in IRS Publication 501 to figure out who can claim the child. Rental losses There are special rules that allow you to deduct rental real estate losses against your regular income. First, you can deduct up to $25,000 in losses if you actively participate in the renting of your property. That phases out if your income exceeds $100,000 and vanishes when it reaches $150,000. You can still write off these losses if you are considered a real estate professional – someone who spends more than half of their working time and 750 hours a year in real estate. If you claim yourself as a real estate pro, the IRS could take a microscope to your return, Allec says. Make sure to document the hours you spend on your real estate business in case you’re fingered for a review. Source: Yahoo Finance

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16 Apr 2019

Advisors Management Group

10 Surprising Things That Are Taxable

If you work for a living, you know that your wages are taxable, and you’re probably aware that some investment income is taxed, too. But the IRS doesn’t stop there. If you’ve picked up some extra cash through luck, skill or criminal activities, there’s a good chance you owe taxes on that money as well. Here are 10 things you may not know are taxable. Buried Treasure If you unearth a cache of gold coins in your backyard or discover sunken treasure while deep-sea diving, the IRS wants a piece of your booty. Found property that was lost or abandoned is taxable at its fair market value in the first year it’s your undisputed possession, the IRS says. The precedent for the IRS’s “treasure trove” rule dates back to 1964, when a couple discovered $4,467 in a used piano they had purchased for $15. The IRS said the couple owed income taxes on the money, and a U.S. District Court agreed. Scholarships If you receive a scholarship to cover tuition, fees and books, you don’t have to pay taxes on the money. But if your scholarship also covers room and board, travel and other expenses, that portion of the award is taxable. Students who receive financial aid in exchange for work, such as serving as a teaching or research assistant, must also pay tax on that money, even if they use the proceeds to pay tuition. Stolen Property If you robbed a bank, embezzled money or staged an art heist last year, the IRS expects you to pay taxes on the proceeds. “Income from illegal activities, such as money from dealing illegal drugs, must be included in your income,” the IRS says. Bribes are also taxable. In reality, few criminals report their ill-gotten gains on their tax returns. But if you’re caught, the feds can add tax evasion to the list of charges against you. That’s what happened to notorious gangster Al Capone, who served 11 years for tax evasion. Capone never filed a tax return, the IRS says. Gambling Winnings What happens in Vegas doesn’t necessarily stay in Vegas. Gambling income includes (but isn’t limited to) winnings from lotteries, horse races, casinos and sports betting. The payer is required to issue you a Form W2-G (which will also be reported to the IRS) if you win $1,200 or more from bingo or slot machines, $1,500 or more from keno, more than $5,000 from a poker tournament, or $600 or more at a horse track if it’s more than 300 times the amount of your bet. Even if you don’t receive a W2-G, the IRS expects you to report your gambling proceeds on your tax return. Proceeds From Fantasy Sports Your winning football (or baseball) team may be imaginary, but if your brilliant lineup helped you win real money, it’s taxable. If you won $600 or more and played through a commercial website, you should receive a 1099-MISC reporting your earnings. The IRS will receive a copy of this form, too. Even if you won a private fantasy league among friends, your winnings are considered taxable. The rules for fantasy football fortunes are the same as those for gambling income. You can deduct your losses (including entry fees in leagues where you didn’t win) against your gains, as long as they occurred in the same year. Payment for Donated Eggs Every year, thousands of young, healthy women donate their eggs to infertile couples. Payments for this service generally range from $6,500 to $15,000, according to Egg Donation, Inc., a company that matches donors with couples. Those payments are taxable income, according to the U.S. Tax Court. Fertility clinics typically send donors and the IRS a Form 1099 documenting the payment. The Nobel Prize If you were selected for this prestigious honor—worth about $995,000 in 2018—you must pay taxes on it. Other awards that recognize your accomplishments, such as the Pulitzer Prize for journalists, are also taxable. The only way to avoid a tax hit is to direct the money to a tax-exempt charity before receiving it. That’s what President Obama did when he was awarded the Nobel Peace Prize in 2009. If you accept the money and then give it to charity, you probably will have to pay taxes on some of it because the IRS limits charitable deductions to 60% of your adjusted gross income. Gifts from Your Employer Ordinarily, gifts aren’t taxable, even if they’re worth a lot of money. But if your employer gives you a new set of golf clubs to recognize a job well done (or to persuade you to reject a job offer from a competitor), you’ll probably owe taxes on the value of your new irons. More than 50 years ago, the Supreme Court ruled that a gift from an employer can be excluded from the employee’s income if it was made out of “detached and disinterested generosity.” Gifts that reward an employee for his or her services don’t meet that standard, the court said. Gifts that help promote the company don’t meet that standard, either. Bitcoin While you can use bitcoin to purchase a variety of goods and services, the IRS considers bitcoin—along with other cryptocurrencies—to be an asset. If the bitcoin you used to make a purchase is worth more than you paid for it, you’re expected to pay taxes on your profits at capital gains rates—just like stocks and bonds. If your employer pays you in bitcoin or some other virtual currency, it must be reported on your W-2 form, and you must include the fair market value of the currency in your income. It’s also subject to federal income tax withholding and payroll taxes. Bartering When you exchange property or services in lieu of cash, the fair market value of the goods and services are fully taxable and must be included as income on Form 1040 for both parties. But an informal exchange of similar services on a noncommercial basis, such as carpooling, is not taxable. If you exchanged property or services through a barter exchange, you should expect to receive a Form 1099-B (or a similar statement) in the mail. It will show the value of cash, property, services, credits or scrip you received from bartering. Source: Kiplinger.com

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10 Apr 2019

Advisors Management Group

Another Tax Headache Ahead: The IRS is Changing Paycheck Withholdings

You finally finished your taxes and are learning the ins and outs of the new law. But wait, the law isn’t done with you. There’s another complication coming out later this year: The Internal Revenue Service is changing how you adjust your paycheck withholdings, and early indicators show it won’t be easy. The agency plans to release a new W-4 form that better incorporates the changes ushered in by the new tax law so that the amount held back for taxes in each of your paychecks is more accurate. The agency’s goal: A taxpayer shouldn’t owe or be owed come tax time. But the changes won’t be simple, says Pete Isberg, head of government affairs at ADP, the payroll and human resources company. Filling out the new form will be a lot like doing your taxes again. “It’ll be a much bigger pain,” he says. “The accuracy will be 100 percent, but the ease-of-use will be zero.” What's changing? While the new form hasn’t been released yet, the IRS last summer put out a draft version and instructions seeking feedback from tax preparation companies and payroll firms. Instead of claiming a certain amount of allowances based on exemptions – which have been eliminated – the draft form asked workers to input the annual dollar amounts for: Nonwage income, such as interest and dividends Itemized and other deductions Income tax credits expected for the tax year For employees with multiple jobs, total annual taxable wages for all lower paying jobs in the household “It looked a lot more like the 1040 than a W-4,” Isberg says. The new form referenced up to 12 other IRS publications to fill it out. It was so complex and different from the previous W-4 form that Ernst & Young worried employees would struggle to fill it out correctly and employers may need to offer training beforehand. Why is it taking so long? The tax and payroll community expressed many concerns about the draft form aside from its complexity. Many cited privacy issues because the form asked for spousal and family income that workers might not want to share with their employers. Other employees may not want to disclose they have another job or do side work outside their full-time job. To avoid disclosing so much private information, taxpayers instead could use the IRS withholding calculator, but it’s “not easy to use and the instructions are confusing,” according to feedback from the American Payroll Association. In September, the IRS scrapped plans to implement the new W-4 form for 2019 and instead is planning to roll it out for 2020. What to expect Another draft version of the new W-4 is expected by May 31, according to the IRS, which will also ask for public comment. “We encourage taxpayers to take advantage of that opportunity and send us comments on the redesign,” says agency spokeswoman Anny Pachner. The IRS will review the comments and plans to post a second draft later in the summer. The final W-4 version will be released by the end of the year in time for the 2020 tax year. Once it arrives, you’ll probably need the following information on hand, says Kathy Pickering, executive director of H&R Block’s Tax Institute. That may mean lugging in past 1099 forms, paystubs or last year’s tax returns to fill it out correctly. Your filing status Number of dependents Information about your itemized deductions such as home mortgage interest, state and local taxes, and charitable deductions Earnings from all jobs Information about nonwage income such as business income, dividends, and interest. “If you’re married, and both you and your spouse work, it will also be helpful to know information about your spouse’s income,” she says. You may also need to fill out a new state income withholding form. Many states use the current W-4 for withholding, but they may need to release their own forms, too. While these new forms may be more accurate, it looks like they are going to be a pain to use. Watch for the forms coming out this May, so you can make comments on the redesign.  Source: Finance.Yahoo.com

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19 Feb 2019

Advisors Management Group

Ex-Workers Get More Time to Repay 401(k) Loans

If you leave your job while you have an outstanding 401(k) loan, Uncle Sam now gives you extra time to repay it -- thanks to the new tax law. The new tax law changed the deadline for repayment after you leave your job starting in 2018. In the past, you generally had only 60 days to repay the loan or else you’d have to pay income taxes on the money as if it was a withdrawal (and a 10% early-withdrawal penalty if you left your job before age 55). But under the Tax Cuts and Jobs Act, you don’t have to pay taxes or the penalty if you repay the loan by the due date of your tax return for the year when you leave your job (including extensions). For example, if you leave your job in 2019, you’d have until April 15, 2020, to repay the loan (or October 15, 2020, if you file an extension). However, taking advantage of this extended time frame to repay could lead to complications if you’d like to roll over your 401(k) balance to a new employer’s plan, says Michael Weddell, director of retirement at benefits consultant Willis Towers Watson. You can generally borrow up to half of your 401(k) balance, but no more than $50,000. Most plans charge the prime rate plus 1 percentage point for the loan, which as of mid-February would add up to 6.50%. You generally have five years to pay back the loan while you’re still working for that employer or longer if the 401(k) loan is to buy your primary residence. Most plans give employees 10 to 15 years to repay a loan for a primary residence, although some plans have deadlines as short as five years or as long as 30 years, says Weddell. If you do take a 401(k) loan, try to keep contributing to your 401(k) while you’re paying back the loan so you can continue to receive any employer match and to minimize the hit to your long-term savings. You borrow your own money and pay the interest back into your account. But you will lose the opportunity for investment gains on the borrowed money while it’s out of the account. Just because you had to take a loan, Weddell says, is no reason to give up on saving for retirement and earning an employer match. Source: Kiplinger.com

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