“Real World” Personal Strategy Blog
April 14, 2014 by Roger Menden, Shakopee Tax Professional
But I also know if I don’t do it now, this tax season having been so full … well, I’ll admit that we can anticipate a bit of a break being needed come Wednesday for ol’ Team Roger Menden :).
And, of course, the other part of me (the wiser part) says: “Roger, helping Shakopee, MN area people with their taxes is only the means to a greater end: enabling your clients to live richer lives, without having to fret about the details.”
My relationship with you is worth the time investment (and more).
But that said, I wanted to take the time today, even in the midst of all of the intensity around here, to say this:
We are extremely grateful for your trust and for the chance you’ve given us to serve you in getting this necessary — and often painful — civic task handled well. I am fully aware that you and your family have plenty of choices here in Shakopee, MN about who you choose to trust with your sensitive financial details.
And we don’t take it lightly. THANK YOU.
Perhaps I should also thank the federal government for creating a tax system so frustratingly complex and counterintuitive for many Shakopee, MN families that it has provided myself and those who work for me with gainful employment.
But leaving my own personal circumstances aside, I’d be thrilled if our tax system was much simpler.
But it isn’t simple — and as I’ve often said, it is far better to live in the reality of what *is* (and work to make positive change), than to simply moan about a problem that is larger than what any one person can change.
Preparing tax returns is like that — it is dealing with what *is* — not with what “could be”.Which is why tax PLANNING will be the subject of a few of my Notes in the future.
And one other thing: If you have filed your taxes with us would you…
A) Write me and tell me your honest words about it? If it was positive, I’d love to hear specifics — and if not positive, I definitely still want to hear about it!
B) Share us on YOUR Facebook wall…?
Here’s something you can say:
“I had my taxes prepared by Roger Menden’s team, and had a great experience. And even now, they’re willing to review your tax return to make sure that everything was done right for you … Give them a call at: 952-445-8753 and let them know I told you to call.” Join us on Facebook: http://www.facebook.com/pages/Menden-Accounting-Tax-Service-Inc/230199503195
Or some such… thanks again!
Lastly, I hope you’ll forgive me for taking a break from writing you a Personal Strategy Note for this week … I’m not sure that if I did so, anything besides numbers and spreadsheets would come out. It’s amazing what 4 months of staring at government forms does to a brain!
But hey — this is what we signed up for.
We will be in touch again soon. That’s assuming this caffeine hangover should ever release me from its grip, of course!
April 7, 2014 by Roger Menden, Shakopee Tax Professional
I’m still taking the time to step away for a moment and write to you, my friend (if you have all your papers in, and are waiting for our completion — fear not! My team is hard at work, as I type …).
This is often our busiest week of the year for Team Roger Menden (so please be understanding), but it’s also the week when we receive, with clockwork regularity, many questions about extensions.
But before I get there, a couple quick reminders about what ELSE the 15th means…
1) Tuesday, April 15 is the deadline to contribute to IRA’s, etc. in order to have them count on this year’s (2013) taxes.
2) It is also the deadline to claim the almost $800 million in unclaimed refunds for returns dating back to 2010. If you, for some reason, didn’t file for that year, you could be missing out. Call us for this special circumstance: 952-445-8753
(Or for any other question — but again, bear with us, as we are extremely busy!)
And one last thing: if you have filed your taxes with us already, and you had a good experience, would you…
A) Email me about it?
B) Share us on your Facebook wall…?
Join us on Facebook: http://www.facebook.com/pages/Menden-Accounting-Tax-Service-Inc/230199503195
Here’s something you can say:
I had my taxes prepared by Roger Menden’s team, and had a great experience. They also just told me that they are willing to help procrastinators! So, if that’s you, give them a call at: 952-445-8753 and let them know I told you to call. Or you could do it tomorrow, of course
Or some such… thanks again!
Shakopee, MN Tax Preparer On: Tax Extensions, Demystified
“Only undertake what you can do in an excellent fashion. There are no prizes for average performance.” – Brian Tracy
There is a lot of confusion in the Shakopee, MN tax preparation orbit, every year, about extensions — so here’s what they’re REALLY about…
As you know, Tuesday, April 15th is the filing deadline for a federal tax return. If you need more time to get your paperwork complete, you need to file (or have us file on your behalf) Form 4868 (Automatic Extension of Time to File – http://www.irs.gov/pub/irs-pdf/f4868.pdf ) with the IRS by the end of the day on the 15th. This gives you an automatic six-month (until October 15, 2014) extension of time to file.
Here’s the deal: An “Extension of Time to File” is not an “Extension of Time to Pay”, unfortunately – except for certain cases (more on these in a moment). In normal circumstances, the Extension simply gives you an automatic six months of additional time to get your paperwork together and file that return. But, if you owe more than what you paid with your estimate, you’ll be accumulating penalties and interest on the difference–so PLEASE don’t take the entire six months to do this!
The exception to this rule is for:
1) Those affected by the Washington state flooding
2) Wage earners who have been unemployed at least thirty consecutive days during 2013 or in 2014 up to this year’s April 15 tax deadline; or
3) Self-employed individuals who experienced a 25 percent or greater reduction in business income in 2013 due to the economy.
So, if that’s you — let us know! We’ll get you payment relief.
For the rest of you, when filing your “Extension of Time to File”, you’ll need to estimate what you think you owe to the IRS. This should not be pulling numbers out of thin air (or various body parts)! You’ll still need to go through your receipts and tax documents and get them “somewhat” organized.
From here, you can estimate both your income and your expenses, and then approximate what you owe Uncle Sam. Keep in mind that this is an ESTIMATE. And, you’ll have to pay what you estimate you owe at the time we file for the extension.
You can do this all electronically through our office, you can mail in the form WITH estimated payment (must be postmarked by the 15th), or you can call a specialized provider and pay by credit card. We can provide you with the appropriate number to call.
And it’s NOT TOO LATE!
April 1, 2014 by Roger Menden, Shakopee Tax Professional
I teased around the idea of playing some kind of prank on my readers, something about the tax code being abolished in favor of one short form of four pages … but I thought that would be cruel and unkind.
Not that any of us here in Shakopee, MN would fall for it. Nobody would ever believe THAT. (http://taxfoundation.org/blog/americas-first-income-tax-form)
I’m quite serious today though, because I want to speak to a serious problem: procrastination. I have some thoughts for you on that, but before I get there, some important notes…
Firstly, even at this late hour, we will gladly receive friends of our existing clients — we make a special point to accommodate clients’ friends, because we’ve found that our great clients have very good taste in friends.
So, share this article with your friends right now and make sure they let us know you sent them. They can also call: 952-445-8753 and we’ll be their last-minute lifeline!
* Obamacare Deadline Extended: If you haven’t signed up for insurance, and you can comfortably assert that you “started” before Monday, March 31 … well, you have more time. Not sure yet how much, but … you have more time. Procrastinate away!
* Do you have any Bitcoin? We probably need to talk then — the IRS just decided to classify it as “property”, so capital gains taxes now apply (effective immediately). We can help you with it, as it’s important to be smart about your transactions there. Tax software is NOT equipped for this.
* Are you carrying student loans? Beware new “forgiveness” schemes. There could be a big ol’ tax bill in your future. Again, software is part of the problem here. I may have more to say on this in the future.
Now, lest we procrastinate further, on to the meat.
Your Friendly Shakopee, MN Tax Preparation Expert on Doing Real Work Through Procrastination
“You can use the fanciest computers to gather the numbers, but in the end you have to set a timetable and act.” – Lee Iacocca
Right now, there are an infinite number of things you could be doing. No matter what you work on, you’re not working on everything else. So the question is not how to avoid procrastination, but how to procrastinate well.
In my view, there are three kinds of procrastination. Depending on what you do instead of working on something, you could work on:
(b) something less important, or
(c) something more important.
That last type, I’d say, is good procrastination.
This is the “absent-minded professor” who forgets to shave, or eat, or even perhaps look where he’s going while he’s thinking about some interesting question. His mind is absent from the everyday world because it’s hard at work in another.
That’s the sense in which the most impressive people I know are all procrastinators. They’re type-C procrastinators: they put off working on small stuff to work on big stuff.
What’s “small stuff?” Roughly, work that has zero chance of being mentioned in your obituary. It’s hard to say at the time what will turn out to be your best work (will it be your thesis for your PhD, or that detective thriller you worked on at night?), but there’s a whole class of tasks you can safely rule out: shaving, doing your laundry, cleaning the house, writing thank-you notes–anything that might be called an errand.
Good procrastination is avoiding errands to do real work.
Good in a sense, at least. The people who want you to do the errands won’t think it’s good. But you probably have to annoy them if you want to get any real work done. The mildest-seeming people, if they want to do real work, all have a certain degree of ruthlessness when it comes to avoiding errands.
Some errands, like replying to emails, go away if you ignore them (perhaps taking friends with them). Others, like mowing the lawn, or filing your tax returns, only get worse if you put them off. In principle, it shouldn’t work to put off the second kind of errand. You’re going to have to do whatever it is eventually. Why not (as past-due notices are always saying) do it now?
The reason it pays to put off even those errands is that real work needs two things errands don’t: big chunks of time, and the right mood. If you get inspired by some project, it can be a net win to blow off everything you were supposed to do for the next few days to work on it. Yes, those errands may cost you more time when you finally get around to them. But if you get a lot done during those few days, you will be net more productive.
So here’s where we come in.
Consider us “The Ultimate Procrastination Solution”.
Allow us to take the pain away from these second-level tasks (like getting your return filed) — and you go back to writing that killer novel.
March 24, 2014 by Roger Menden, Shakopee Tax Professional
Well, before the weekend was over from our vantage point here in Shakopee, MN, Buffett’s billions were safe from any perfect brackets, and the field of 64 college basketball teams was narrowed down to 16 which nobody actually predicted — not even this humble Shakopee, MN tax preparer.
Which, of course, is exactly how it always goes.
We make plans, but life comes hurtling at us at speeds we never anticipate. Plans are made to be scrapped … but it’s the living AFTER those plans become irrelevant that really matters.
Before I get into the meat of my note for our Shakopee, MN tax preparation clients this week, a few vegetables:
* The IRS is warning of “the largest scam of its kind we have ever seen.”(http://www.washingtonpost.com/blogs/federal-eye/wp/2014/03/20/irs-watchdog-warns-of-largest-scam-of-its-kind/ – be on guard, people.)
* There is still $760+ million in unclaimed tax refunds from 2010 waiting for its home. Make sure that your 2010 return was done PROPERLY (especially if prepared by another Shakopee, MN – area tax office), and have Roger Menden and the team review it for you by April 15th!
Now, last week, I gave you a framework for how you should be considering retirement. I have more to say this week, but it’s more along the lines of a bigger picture approach to the whole question. My hope is that it will give YOU hope … for whatever stage you happen to find yourself in the retirement progression.
We’re working like busy bees here in the Shakopee, MN tax offices on client tax returns these next few weeks before April 15th, and I would also like to say: if you have not yet done so, we need to get your information to complete your return as soon as possible. This has been a very busy season … so as much as you can enable us to do our work on your behalf, the better.
Give us a call: 952-445-8753 or shoot me an email to let us know your plans.
“When planning for a year, plant corn. When planning for a decade, plant trees. When planning for life, train and educate people.” – Chinese Proverb
Retirement used to mean not only a complete withdrawal from the workforce but often a retreat from life. Even the word “retire” has the connotations of shuffling quietly off to bed.
We call that traditional concept a “cliff retirement” here in our Shakopee, MN tax preparation offices because it is so abrupt. One day you are working full-time, and the next you are playing full-time (or slumped in your chair watching TV feeling unwanted and over the hill).
We all need meaning and significance in our lives. And close social relations are an intrinsic part of our humanness. For many people, work provides meaning, significance and social relationships.
Try this retirement planning exercise. Draw a large circle and write the names of 10 people inside the circle to whom you are genuinely close. Don’t include any relatives. To a certain extent, they have to love us, and although our connections with our families can be very nurturing, it is often friends who really help to validate us and widen our horizons.
Now cross out any of the 10 names you know through your work, which might eliminate half or more of the people you listed. Thus a cliff retirement can devastate not only your meaning and purpose but your social network as well. Retirees who no longer work at all say their close friends dwindle to an average of about nine people.
As a result of their isolation, people who opt for a cliff retirement often deteriorate quickly and die relatively young. Financial planning is easy when you die young, but we don’t recommend it.
Here are some suggestions to consider as you approach what is traditionally considered retirement age.
Consider postponing retirement. Delaying retirement until age 70 increases your Social Security benefits and also shortens the time you will be withdrawing from your portfolio. It gives you additional years to save and your portfolio more time to grow. By delaying retirement from age 65 to 70, you may have more than a 50% higher standard of living when you do stop working.
Or instead of taking a cliff retirement, think about retiring gradually. Move from full-time to 30 hours a week, and then to half-time. With this less hasty transition you can maintain contact with the people and purposes that give your life meaning and also have the time to develop goals and a network of relationships for your later years.
Envision your final years not as retirement but as financial independence. Now that you don’t need to work exclusively for money, make a list of activities where you would like to focus your energies and use your skills and experience.
Consider developing a health and fitness routine. If work kept your mind and body engaged, you will need to replace that activity with other pursuits. Again, going part-time allows you the luxury of processing the transition and adjusting to a new lifestyle.
Challenge and reexamine those stereotyped and overly rigid assumptions about retirement. Two books that may help you tailor your retirement to be a productive and satisfying time of your life are Encore: Finding Work That Matters in the Second Half of Life by Marc Freedman, and The New Retirementality: Planning Your Life and Living Your Dreams at Any Age You Want by Mitch Anthony.
Of course crunching the financial numbers is critical as you begin to contemplate retirement, or any kind of financial or tax planning. But your personal calling, support network, and health and well-being are just as important. In the end, a holistic approach to your life is always the best starting place.
I hope this all helps! To your family’s LONG-TERM well-being …
And don’t forget to send your friends our way! We’re quite busy, of course, but always make room for referrals from trusted sources…
March 17, 2014 by Roger Menden, Shakopee Tax Professional
As I write this from the best Shakopee, MN tax preparer headquarters around, we’re celebrating St. Patrick’s Day, and most of the world is furiously analyzing and setting up their March Madness brackets — in order to vanquish and impress their friends and spouses, or perhaps to snag a shot at Mr. Buffett’s money (http://www.forbes.com/sites/kellyphillipserb/2014/03/03/registration-for-warren-buffetts-1-billion-basketball-challenge-opens-today/).
Brackets, brackets, brackets. There’s even a bracket for Girl Scout cookies, for goodness sakes, on USA Today. (http://ftw.usatoday.com/2014/03/best-girl-scout-cookie-bracket/)
And, of course, the old tax brackets — which we’re spending plenty of time with these days here at Team Roger Menden!
But no, St. Patrick did NOT create a retirement savings bracket. Not sure the fine old saint would have cared much about retirement, or basketball.
However, that doesn’t mean it’s a subject (retirement, that is) which you should ignore.
I did some simple math this week, based on a conversation with a Shakopee, MN tax preparation client, and it prompted me to put together this explanation for you — or, perhaps, for your parents or those nearing retirement age.
It’s about the proper place for how we should see Social Security. Because aside from what I am writing about below, Social Security cannot be passed to heirs (notwithstanding spousal death benefits).
That’s one disadvantage, but it’s not the only one…
Your Shakopee, MN Tax Accountant Explains The Proper Place for Social Security
“When I look back on all these worries, I remember the story of the old man who said on his deathbed that he had had a lot of trouble in his life, most of which had never happened.” -Winston Churchill
Imagine a Shakopee, MN – area man named Bill Fredericks, born in 1948, who is celebrating his 66th birthday today by filing to collect Social Security at full retirement age. Bill’s final salary was $50,000 per year, although when he started working in 1968 he was only earning $7,304 annually.
For the past 46 years Bill has had Social Security withheld from his paycheck from a local Shakopee, MN small business. When he first started, the total Social Security withholding was only 7.6%, which for Bill was $46.26 of his $609 monthly paycheck. On his last pay stub, the government took 12.4%, or $516.67 of his $4,167 monthly salary.
Because Bill was not subject to the current 12.4% withholding during his entire working career, his Social Security benefit will receive a more generous return than any of today’s young people will receive.
Social Security withholding is split into an employee portion and an employer portion. But practically speaking for the employer, both portions are just additional costs of hiring the employee. Neither gross nor net wages would change if technically the employee or the employer were paying the entire amount.
Bill’s lifetime withholding totaled $152,068. In today’s dollars, it means Bill paid $260,163 to Social Security.
This withholding qualifies Bill to receive $24,180 a year, just under half of his former salary. When he dies, only if Bill has a surviving spouse whose earning record was smaller than his will this benefit survive him.
Many have said that Social Security is perfectly suitable option for a real retirement account. But the real way to test is what would have happened had Bill been allowed to keep his Social Security benefit and invest it in a private IRA account.
I got some help and computed this hypothetical return in an age-appropriate portfolio between the S&P 500 Stock Index and the US Aggregate Bond Index. With only a monthly contribution of his Social Security withholding, by age 66, Bill’s portfolio would have grown to $1,431,487.
With a safe withdrawal rate at age 66 of 4.43%, this IRA would give Bill an income of $63,415 per year rising with inflation. On average this withdrawal rate would be sustainable until Bill’s 101st birthday. But at his average life expectancy at age 84, he would leave an estate that would still be over a million dollars in today’s dollars.
Social Security offers Bill only $24,180 a year, half of his former salary. In contrast, (according to my simple math) his IRA account would allow him to retire with $1.4 million, and a 27% raise, as well as leaving a legacy for his heirs. (Mild disclaimer here — these are based on average returns, and it does not constitute a “guarantee”.)
According to my calculations, it seems pretty clear that workers under age 60 should tilt heavily toward stock investments. Even if Bill had blindly invested in 40% bonds, his portfolio would still have grown to $1,186,472 — a yearly income of $52,561, rising with inflation.
Social Security should be seen as an option of last resort for today’s workers. The unfortunate fact is that every 46-year investment horizon since Social Security was made law would have produced better returns had the withdrawals been invested privately. Even the Social Security withdrawals of average workers would produce millionaires if they were allowed to be saved and invested in private accounts.
That’s why I recommend my clients and their friends to view Social Security as a tax, and not as a savings or retirement account. That way, we are able to not rely on it solely for our future lifestyle options, and can receive whatever benefit might remain in the future as a “bonus”.
Even if peeling off a few hundred dollars per month (hopefully more!) might seem like a stretch at this point in your career, it is worth it to ensure that you don’t have to subsist under a massive pay cut after your prime working years have completed.
Even now (as I write, and as you receive this), you can still make a tax-savings decision for your 2013 return by opening an IRA (or, even better, a Roth IRA). Contributions made before April 15th will count as a deduction for your 2013 return.
The best part is that your future self will thank you!
And don’t forget to send your Shakopee, MN (or beyond) friends our way! We’re quite busy, of course, but always make room for referrals from trusted sources…
March 10, 2014 by Roger Menden, Shakopee Tax Professional
In early January, I sent a “checklist” email to our Shakopee, MN tax preparation business list (and if you’re not receiving our weekly emails, you really should fill out the quick form here on this page to receive a copy of one of our free reports — we’ll add you to our list as well, so you’ll be the among the first to receive important updates and exclusive offers from us), and it was one of our most popular messages. I guess it was handy!
Putting together this list for those who are preparing taxes in the Shakopee, MN area may run slightly counter to my business goals — after all, we do get paid to do this on behalf of clients! That said, our mission is to ensure that EVERYONE in the local Shakopee, MN area saves the most possible when the IRS comes calling. Some of these may seem small, but trust me when I say that they add up.
But today, I would like to take a minute here to address you looking for the best tax preparer in Shakopee, MN who haven’t yet made the decision to use our services.
You see, we’ve helped many Shakopee, MN (and beyond) families “make the switch” over to us, year after year. I know that you’ve probably established a rhythm with your current provider (even if it’s not a “good” rhythm), and that you may dread the prospect of having to teach a new tax preparer about your family’s financial dreams and goals.
(By the way, are you using a tax professional who cares about those?)
Which is why this blogpost would be for you. (And if you’re already using us, then you can safely ignore this particular message, and skip to the end where we do have some information for you, perhaps merely as a reminder.)
Many Shakopee, MN families are pulling together their paperwork to deliver to their preparer this week … and before you do that with your existing preparer, I’d like to give you a reason to try us out.
I’d rather not “bad mouth” other tax accountants in the area, but suffice to say that we’ve had to do our share of re-doing other accountants’ work. In some cases, we’ve recovered significant sums during an amendment process, by reviewing an old return (from the last 3 years), and taking advantage of ethical and legal tax credits and deductions which other accountants don’t utilize — whether through ignorance, laziness, or preference.
But even more than that … we want to give you a gift:
Make the “switch” to Roger Menden for your 2013 tax filing — and receive a complimentary post-season tax planning session.
($250 value) First TEN new clients only
Email me now, and we’ll book your tax planning session for some time in May or June (after the chaos of tax season subsides), and we’ll work PRO-ACTIVELY on your asset mix to ensure that your 2014 returns are as well-protected from Uncle Sam’s grasping hands as possible.
Menden’s Tax Time Checklist (Again)
“Don’t lower your standards. Instead, wait for people to rise up to your expectations.” -Susan Gale
Yes, this is a long list — but it’s the unfortunate reality of our tax code that it’s not even comprehensive! But these items will cover 95% of our clients. Really, this is for ensuring that we’re able to help you keep every dollar you can keep under our tax code.
Social Security Numbers (including spouse and children)
Child care provider tax I.D. or Social Security Number
Employment & Income Data
W-2 forms for this year
Tax refunds and unemployment compensation: Form 1099-G
Miscellaneous income including rent: Form 1099-MISC
Partnership and trust income
Pensions and annuities
Jury duty pay
Gambling and lottery winnings
Prizes and awards
Scholarships and fellowships
State and local income tax refunds
Residential address(es) for this year
Mortgage interest: Form 1098
Sale of your home or other real estate: Form 1099-S
Second mortgage interest paid
Real estate taxes paid
Rent paid during tax year
Interest income statements: Form 1099-INT & 1099-OID
Dividend income statements: Form 1099-DIV
Proceeds from broker transactions: Form 1099-B
Retirement plan distribution: Form 1099-R
Capital gains or losses
Auto loans and leases (account numbers and car value) if vehicle used for business
Student loan interest paid
Early withdrawal penalties on CDs and other fixed time deposits
Personal property tax information
Department of Motor Vehicles fees
Gifts to charity (receipts for any single donations of $250 or more)
Unreimbursed expenses related to volunteer work
Unreimbursed expenses related to your job (travel expenses, entertainment, uniforms, union dues, subscriptions)
Education expenses (tuition and fees)
Child care expenses
Medical Savings Accounts
Tax return preparation expenses and fees
Estimated tax vouchers for the current year
Self-employment SEP plans
Self-employed health insurance
K-1s on all partnerships
Receipts or documentation for business-related expenses
State and local income taxes
IRA, Keogh and other retirement plan contributions
Casualty or theft losses
Other miscellaneous deductions
While some of these statements, and their ensuing deductions, may seem like “pocket change” … just a few minutes of effort can pay a nice hourly rate. And, better in YOUR pockets than in Uncle Sam’s, right?
So, I hope this helps.
March 3, 2014 by Roger Menden, Shakopee Tax Professional
We’ve been welcoming some happy (and former) TurboTax customers into our Shakopee, MN tax preparation headquarters this past week … a few of whom were frustrated by the delay in the software’s release of instructions for Form 8960 — which is the new 3.8% tax on net investment income. We have ways to work through that tax for our clients … but apparently, the software has been getting hammered by its users for the delay.
(Just a sampling of some of the frustration out there: https://ttlc.intuit.com/questions/2266554-why-is-form-8960-still-not-available )
But that’s just one of the problems with trusting in a software for your taxes, and I’d rather not belabor the point I already made last week.
And the IRS hasn’t been helping much either. From continuous news reports of employee fraud (like this recent one: http://articles.philly.com/2014-02-13/news/47273785_1_patricia-fountain-irs-worker-tax-filers ), to the familiar refrain of poor customer service (http://www.usatoday.com/story/money/personalfinance/2014/02/16/irs-customer-service/5435961/) … well, let’s just say that it’s never been more clear how important it is to have an experienced hand in your corner. (Ahem.)
But this week, I’m going to take a break on my software- and IRS-bashing, and inform my Shakopee, MN tax clients and friends about an important shift in the financial regulations for seniors. If this doesn’t apply to you or someone you love (as it will for many), then please pass it on to someone whom you know could benefit by being aware of it! Here’s what I’m referring to…
The Reverse Mortgage Regulations Landscape Has Changed for Senior Shakopee, MN Homeowners
“When you learn, teach; when you get, give.” -Maya Angelou
Many Shakopee, MN homeowners understandably want to remain in their homes as they age because they want to remain independent and because they have spent many years making their home everything they wanted it to be. Reverse mortgages have assisted many senior homeowners over the years to stay in their homes when their financial position changed.
A reverse mortgage is a loan for people age 62 or older. It provides money from the equity in your home through a line of credit, monthly payments or a lump sum. It does not require repayment of the loan until you move, sell the property, or pass away, and the homeowner is still responsible for property taxes and insurance.
Now, reverse mortgages were initially developed as a tool to assist individuals to remain in their homes and communities as they grow older, by allowing homeowners to tap their equity without selling their homes. All that said, however, the rules about reverse mortgages recently changed, making them harder to obtain.
And, of course, harder to sell. But that doesn’t stop the advertisements!
In August of 2013, the President signed HR 2167 — “The Reverse Mortgage Stabilization Act of 2013″ (https://www.govtrack.us/congress/bills/113/hr2167/text ) — giving the Federal Housing Administration (FHA) the authority to make necessary changes to the reverse mortgage program. According to the United States Department of Housing and Urban Development (HUD), the changes “reduce their risk and make the program easier for seniors to use responsibly.” For the homeowner, the changes will make it harder to qualify for a reverse mortgage, but will provide additional protections.
Until now, getting a reverse mortgage loan required no credit history and no minimum income requirement. Due to problems with homeowners failing to maintain their property tax and home insurance payments, starting on January 13, 2014, the FHA began requiring lenders to verify that homeowners have the ability to pay their taxes and insurance and that their credit history demonstrates a commitment to paying obligations.
To qualify for a reverse mortgage, lenders now must analyze all income sources — including pensions, Social Security, IRAs and 401(k) plans — as well as credit history. They also look closely at how much money is left over after paying typical living expenses.
In my opinion, these changes are welcome and needed. Too many seniors have been sucked into financial arrangements that were NOT in their best interest.
Now, if a lender determines that you would not be able to keep up with property taxes and hazard insurance payments, they are now authorized to set aside a certain amount of funds from your loan to pay future charges. The amount of the set-aside is based on the life expectancy of the youngest borrower. If set-aside funds run out, you must continue paying property charges using whatever funds are at your disposal.
If a lender determines that you have sufficient income left over, then you don’t have to worry about having any funds set aside to pay for future tax and insurance payments.
These changes, along with the reduced benefits adopted in September of 2013 (see a helpful NYT article here: http://www.nytimes.com/2013/09/07/your-money/tighter-rules-will-make-it-harder-to-get-a-reverse-mortgage.html?pagewanted=all ), mean that many seniors will not qualify for a reverse mortgage to make their homes affordable.
Why the new rules?
Some seniors who obtained reverse mortgages with rather harsh terms found that they were unable to either live off the loan for long, or to pay it back entirely. The FHA’s changes to its reverse mortgage program sets out to encourage homeowners to tap their home’s equity slowly and steadily. Again, this is a good thing, in my opinion.
“What regulators are trying to do is shift behavior so that people are more thoughtful and methodical about how they draw the money,” said Peter H. Bell, president of the National Reverse Mortgage Lenders Association. “The changes are intended to put the program back on track and encourage people to take what they need and no more.”
Reverse mortgages can sometimes interfere with other programs. Keeping money in a reverse mortgage line of credit, in most states, will not count as a resource for Medicaid eligibility purposes so long as the house itself is an exempt resource — which it would be as long as the recipient is living in the home and receiving home-based Medicaid services.
However, transferring money from the reverse mortgage line of credit to a bank account and leaving it there past the end of the month would convert the exempt home equity into a “countable resource” and that would make the person lose his or her Medicaid eligibility.
This important distinction between countable resources and exempt assets is not a simple black and white issue — if you or your loved one is facing the possible need for long-term care, you should have a conversation with a professional who can help you to handle such matters properly.
And once again, allow me to remind you that though we are VERY busy right now, we always have time for you. Give us a call at 952-445-8753 , and let’s get your tax return started right now…
February 24, 2014 by Roger Menden, Shakopee Tax Professional
Watching the Olympics the past couple weeks from Shakopee, MN tax preparation headquarters (well, not while we’re preparing your taxes, of course!), and on the heels of the Super Bowl, we’ve been treated to some pretty great commercials lately, haven’t we? Some of the spots for the Olympics were downright inspiring.
But, of course, we all know that they are made with the express purpose to cause us to purchase. Either through creating dissatisfaction with our current lot, provoking envy/greed/jealousy/desire or by associating a brand with some really nice feelings.
Now, I’m certainly not one to rail against marketing per se. In a sense, this blogpost on my Team Roger Menden site is marketing (of a sort).
But sometimes that marketing can lead Shakopee, MN-area consumers down a path which isn’t in their best interests.And though my writing this could easily be seen as self-serving, that doesn’t keep it from being true. Here’s what I’m referring to:
Trying to prepare your taxes correctly (and completely) on your own.
I should say that I don’t like to crow about other people’s mistakes — especially other, local Shakopee, MN tax professionals.
In fact, in our line of work, much of what we get to do is to *fix* or alleviate those mistakes, at least when it comes to their tax implications. This year (of all years) carries so many changes that tax software users who fall prey to screaming offers and seductive easy-buttons from the “cheap” options are more exposed to wallet-sucking mistakes, or even an audit.
Do you remember when even the former Treasury Secretary, Tim Geithner, testified about tax irregularities in his own personal returns? Do you remember what DIDN’T help him find those irregularities?
Turbo Tax. (Link to a brief clip of his testimony before the Senate: http://www.youtube.com/watch?v=eKVxGlkPRlo#t=130 )
And he’s not alone here in Shakopee, MN. But there’s a good way to fix that problem…
… and a BIG incentive to do so, by the way, at the end of my Note.
Turbo-Charged Audits and Mistakes – Eliminated By Roger Menden
“Talent is a gift that brings with it an obligation to serve the world, and not ourselves, for it is not of our making.” -Jose Marti
You may have heard me say it before, but it’s true: Did you know that we Shakopee, MN-area tax accountants sometimes joke to one another about how good these online software programs (TaxSlayer, TurboTax, TaxACT, FreeFile, etc.) are for our business? Firstly, they are not as “easy to use” as claimed, and secondly … they cost you an arm and a leg.
You might think they’re cheap. And on the surface, you might be right (though, in the last few years, a $1 Billion class action lawsuit was filed in the federal court in Philadelphia alleging gross misstatement of fees and deceptive standards of the federal “FreeFile” program … so even on the surface, it wasn’t always cheap). But I’m not even talking about the money for the service itself.
Using those programs can end up leaving hundreds, or even thousands of your dollars in the coffers of Uncle Sam … even if you follow all of their instructions to a tee. I see it all the time — frustrated Shakopee, MN-area tax preparation clients bringing in their prior year’s tax return, astonished at all the “hidden money” my staff and I are able to find for them.
Choosing the wrong method, or forms, in filing your taxes can place you directly in the crosshairs for an audit.
Even if you don’t owe a ton of back taxes, you still don’t want your record to show some IRS agent that there has been a discrepancy of some kind in the past, so that red flags begin to fly, and then more bureaucratic people start looking through all of your past tax filings and current income holdings … basically taking your social security number, and poking around in your private life.
(And if you think they won’t do this, read a little online about the increased “enforcement” measures the IRS has been taking the last few years.)
They can do a lot of things you won’t want them to do. However, if you keep a clean slate (no IRS correspondence with you, related to filing your taxes incorrectly), the opportunities for them to mess with your personal stuff will be limited.
Here’s another reason why this is so important … now more than ever. New government regulations in 2013-4 (including the much-delayed ACA regulations), delays in Congressional action, and issues with refund “loans” from the big chains are creating a mess in the tax industry… and the “Big Brand Names” (you know who I’m talking about) do NOT want you to think much about it. In fact, they’re doing all they can this year to hold on to their business, and trust me — it is not always good for you.
Yes, it can be seductive to “go it alone” … to trust a piece of software to point out possible deductions. To trust your work to poorly-trained preparers in a big box office. To protect against your chances of audits through online chatroom support or hourly employees.
But it can be a big trap.
Just ask Tim Geithner.
And once again, allow me to remind you that though we are VERY busy right now, we always have time for you. Give us a call at 952-445-8753 , and let’s get your tax return started right now…
February 17, 2014 by Roger Menden, Shakopee Tax Professional
Scattershooting around the Shakopee, MN tax preparation world (taking note of the IRS’s recent “suggestion” to NOT call their phone support — which is fine for you, because you have *this* number: 952-445-8753), I still come back to the big question of the week: how did Valentine’s go?
Some say it’s a “Hallmark Holiday”, but well — some spouses think otherwise, right? Well, if you blew it , I’ve heard that it’s NEVER too late. So make this week count, my friend.
Now this past weekend’s festivities aren’t the only experience I have with the language of love. You see, we here at Team Roger Menden meet with married couples from the Shakopee, MN region (and beyond) almost every week in the course of preparing taxes and handling other such matters. It’s part of what we do — and, as we do so, we get sort of a crash course in marital communication.
Before you get worried — know that we don’t pass judgment on anybody’s marriage! Everyone has their own, unique relational dynamic. And every marriage works a little bit differently — it’s part of what makes it a wonderful institution.
And, after all, nobody has ever accused this Shakopee, MN tax professional of being a “love doctor”.
That said, however, I’ve noticed that *finances* can be a major sticking point in a good marriage.
But there are some simple steps you can take (five, by my count), which will ensure that you don’t ever fall into the trap of letting a good marriage be spoiled by money miscommunication.
Read on, and send your feedback. And, of course, if you need help with any of this, or if you have any pressing tax issues or questions, email me, or call us at 952-445-8753 . We *love* serving YOU!
Shakopee, MN Tax Preparer Shows How To Protect Your Marriage Through Wise Stewardship
“Pretend that every single person you meet has a sign around his or her neck that says, Make Me Feel Important. Not only will you succeed in sales, you will succeed in life.” – Mary Kay Ash
Far too many marriages fall apart. And, sadly, one of the most often-cited reasons for that being the case is financial angst.
We’ve seen enough beautiful marriages around here in our Shakopee, MN tax preparation offices, that I believe that I can put together a few commonalities of how finances are handled in some of the best of relationships — be they marriage, or otherwise…
Start saving when young. Every seven years you delay starting a savings plan cuts in half your ultimate net worth in retirement. Chances are that you know someone who’s getting married this year so send them a copy of this article. It may be more valuable than any check you write.
Budgeting together. Couples that share church activities or philanthropic causes do better financially because their common vision allows them to work together instead of pulling in different directions. They do well while doing good.
So, the more chances you have to do something which helps you to clarify your shared vision, the better the marriage team. Even the simple process of creating and adjusting a family budget provides a forum for discussion of what is really important to the family.
Realize that a budget brings freedom — not constraint. Couples without a budget can, and often do, fight over every dollar spent. But Shakopee, MN couples who have worked together on a budget are already in agreement on the big picture. Once the difficult decisions are made, the specific purchases in each category are much less critical.
Here’s one way this works (among many): Having decided how much money the family can afford to spend on clothes for him and for her, it doesn’t matter as much if he prefers lots of inexpensive clothes and she prefers a few nice pieces, or vice versa. A budget allows discretion and freedom to prevail within the context of cooperation and teamwork.
Pay your family first! Even if it hurts, at first, saving equals paying yourself. And don’t worry in the beginning overly much about where you’re placing your savings — only after you’ve saved several times your annual salary does the rate of appreciation become more important than the actual rate of savings. The main thing, early on, is to do it!
Because money makes money. And the money that money makes, makes even more money.
Limit the amount you spend unless you both agree. One big mistake can undo months of frugality and sacrifice. So it’s a good idea, that for big purchases, you require both members of the team to agree. Honoring each other in this way helps avoid resentment and disgust.
Have a small slush fund. Both members of a marriage should have a slice of the budget which is completely at their discretion. So long as their spending stays within this thin slice of the budget pie, they can be completely frivolous. Maybe it’s only 0.5% of your total budget, but it’ll provide a place to put purchases which otherwise might cause marital strife.
If one member collects ceramic pink pigs and the other signed collectible hockey cards they can both enjoy their frivolous expenditures without jeopardizing budget items that are more important to the family.
Couples that learn to live proportionately maintain their balance, whether they are rich or poor. No matter the circumstances, they include some fun, some gifting, and some investing as a reflection of their shared family values.
And it starts with having the conversation. So do it!
And once again, allow me to remind you that though we are VERY busy right now preparing taxes for Shakopee, MN couples and taxpayers, we always have time for you. Give us a call at 952-445-8753 , and let’s get your tax return started right now…
February 10, 2014 by Roger Menden, Shakopee Tax Professional
Many of our Shakopee, MN tax preparation clients have never received that dreadful notice from the IRS, initiating an audit — or, much worse, the KNOCK on the door! If you never have, you probably don’t keep much financial documentation.
If you have, you are probably terrified to part with a single receipt.
Unfortunately, the IRS is one of the few courts where failure to produce proof of your tax claims results in the assumption that you are guilty of tax fraud.
(This is part of the reason why you ALWAYS want a competent Shakopee, MN area tax professional on your side in these matters. Would you go to court without an advocate? Would you go before a court with a software-generated defense? “Your honor, here is my lawyer, Siri.”)
So, during these days of tight government budgets, it’s imperative that you are able to protect yourself. And, as great as we are here at Team Menden — some of this falls in your court. That’s why you must save all the financial documents used to create your tax returns in order to defend yourself in the case of an audit.
So, with self-protection in mind, here’s my guide for Shakopee, MN taxpayers on how long to be keeping your records…
Self-Protection Through Knowing How Long To Keep Tax Records, by Roger Menden
“Problems are only opportunities in work clothes.” – Henry J Kaiser
First, retain a paper copy or receipt of any tax-relevant transaction. Scan these documents and archive them electronically, or acquire them in an electronic format. If the purchase has a manual or warranty, store all the documents in the same electronic and physical location.
Sadly, the IRS has ruled bank or credit card records to be insufficient documentation. As a result, just keep your statements long enough to reconcile your account.
If the purchase was a business or tax-deductible expense, record the expense and why it justifies the deduction. Store this information with or on the receipts.
Second, keep brokerage statements indefinitely for taxable accounts. You are responsible for reporting the cost basis of any security you sell to calculate the capital gains tax. For a mutual fund with 30 years of reinvested dividends, each dividend payment is part of the cost basis. As a result, the cost basis can sometimes be computed only if you have the complete transaction history.
Without knowing the cost basis, the IRS could argue that the entire value of the investment be treated as gain.
If you have lost the record of how much you originally paid for an investment, instead of selling and paying 15% or more of the value in taxes, you can use that investment as part of your charitable giving. Gifting appreciated stock avoids the tax owed and still qualifies for a full deduction. Oddly enough, the IRS still asks for the original purchase date and price for gifted securities, but leaving these blank has no effect on your tax owed.
Many custodians keep several years of electronic copies of brokerage statements available. And they are now required to send any known cost basis electronically when you transfer securities to a new custodian. If your current custodian has the correct cost basis of your securities, you probably no longer need to keep brokerage statements. However, an approach of “better safe than sorry” is always advisable with the IRS.
Third, keep IRA nondeductible contribution records forever. You may need those records every year that you withdraw money in retirement to show that a portion of the withdrawal is not tax deductible.
Or to avoid the hassle, clear out nondeductible IRA contributions by converting all of your IRA accounts to Roth accounts.
Fourth, keep partnership documents, contracts, commission or royalty structures forever. This includes property records, deeds and titles, especially those relating to intellectual property. It also includes any transfers of value for estate planning purposes.
Finally, save all of your tax returns. After you file, save the paper and/or electronic copies with the rest of that year’s financial documents.
Tax returns and all the supporting documentation must be kept at least seven years. The IRS can audit your return for up to three years from your filing date. However, the three-year limit only applies to good-faith errors.
If the IRS suspects you underreported your gross income by 25% or more, they have up to six years to challenge your return. And because you may file for an extension at the October 15 deadline, you must keep your records for at least seven years.
Regardless of those rules, though, if the IRS suspects you filed a fraudulent return, no statute of limitations applies. Because the IRS is run and organized by fallible people (with all of their attendant biases, emotions, etc.), we suggest keeping your tax returns and documents forever.
Unfortunately, whenever the IRS challenges you, the burden of producing evidence that your claims are true rests entirely with you, so you had better have your documentation in order.
Taxpayers collectively spend six billion hours, or 8,758 lifetimes, annually trying to comply with the tax code. Fortunately, as I previously mentioned, YOU don’t have to be the one to do all the heavy lifting. We here at Team Roger Menden are on your side…
I hope this all helps! To your family’s financial and emotional peace…