“Real World” Personal Strategy Blog
“Those Little Mistakes Will Be Your Undoing” Shakopee Accountant Reports
January 23, 2012 by Roger Menden, Shakopee Tax Professional
"Failure doesn’t kill you … it increases your desire to make something happen." – Kevin Costner
As I write this on Monday morning, there are a bunch of tears in Baltimore and San Francisco.
If you’re not a football fan — let me briefly tell you why: yesterday, in Baltimore, a game-tying "gimme" field goal went wide left, and in San Francisco a fumble and another small error (the ball grazing the leg of a player) were largely responsible for an overtime loss. So New England and New York (Giants) are headed to Indy for the Super Bowl.
Little hinges swing big doors, as they say.
Our offices are starting to get pretty busy. Last week, the IRS began accepting e-filed returns (for which they save $3.10 each, which adds up) and we’re getting a bunch of emails and phone calls (952-445-8753, by the way) with little questions.
It’s smart to ask the little questions. Because this year, the IRS will be scrutinizing returns in unprecedented ways — and they pay careful attention to those "little" things.
As you know, I don’t always write about taxes in my weekly Notes — in fact, I make a point to put these together differently than all those other accountants who spit out pre-heated leftovers to their clients in the form of canned "tax tips" and useless content. But this time of year is when many of my clients and contacts are figuring out exactly how they’ll be pulling together their tax file … and, well, it’s a pretty important decision. I want to speak to it while there’s time to help.
So, here’s what I mean…
Roger Menden’s
"Real World" Personal Strategy
The IRS is Paying Close Attention
Think tax evasion is a small problem? The Tax Justice Network released a report at the end of 2011 which showed that tax evasion amounts to $337.3 billion per year in the US. Yes, that’s billion with a "B".
This was based on numbers from 1999 to 2006, and is probably even higher in recent years, as the weak economy may have led more people to hide money from the government. As an example, the average tax refund decreased by $100 in 2011 — perhaps people are reporting less income in order to keep more of their money.
Now, it’s hard for us wrap our heads around how much money that really is. Here’s a way to do so: Recently, Congress was unable to agree on a plan which would reduce the national deficit by $1 trillion over 10 years. Over that same time period, tax evasion will cost us well over $3.3 trillion.
Given my profession, perhaps it’s obvious that I’m a big proponent of everyone following the tax rules. When we don’t, it means that everyone else has to pick up the slack. And the consequences of all of this reporting about tax fraud is greater scrutiny on honest taxpayers, and higher tax rates.
The IRS is Catching More Tax Evaders
The "good" news is that the IRS is doing a better job of catching people who aren’t paying their fair share of taxes. Fraud investigations increased by 14% in 2010, while prosecution recommendations (cases that the IRS thinks should be brought to court) increased 18% and convictions increased by 4%.
Again, it’s possible that some of these increases are due to the economic situation of the past few years, but the fact that the IRS decreased its investigation time by nearly 40 days is a sign that the IRS is doing a better job.
Don’t Give In To The Pressure; Avoid Taxes — LEGALLY
Here’s what you should understand — the rise in tax evasion means that the IRS is continuing to increase its scrutiny on every return. But that doesn’t mean you have to give up the fight! There are innumerable LEGAL ways to avoid paying too much in taxes. And, unfortunately, software programs and fly-by-night tax shops don’t do a very good job of proactively seeking them out for you.
But perhaps you know someone who does?
“This Is Self-Serving, But It Needs To Be Said” Shakopee Accountant Reports
January 16, 2012 by Roger Menden, Shakopee Tax Professional
"The most important thing in communication is hearing what isn’t said." – Peter F. Drucker
As I wrote a couple weeks ago, the start of the year is pretty important, in my opinion. And the LAST thing you need is to be stressed over finances.
Yet that’s, unfortunately, how many families start their year, this year.
So, is there anything we can do to help? Yes, we live to help you with your taxes, but what truly animates me and my staff is the fact that assisting real families (like yours) can make a difference — not just in your "bottom line", but in the peace by which you operate. That’s, really, why we do what we do.
So, do let us know if there’s anything at all we can help you with: 952-445-8753
Indeed — we’re getting very close to the point where we begin to see many folks walk through our doors with their tax information in hand. Last week, I posted a mostly-complete list of what you will need to get your taxes done.
Well, today my message runs a significant risk of being extremely self-serving. I get that, but I want you to know that isn’t why I’m writing it. Sure — I want my business to do well, and that happens when our clients keep using our services and refer their family and friends our way.
But I’m writing this today to give you a warning about some new options available to taxpayers, which haven’t always been there. I hope you hear what I have to say, and that you take it to heart.
Roger Menden’s
"Real World" Personal Strategy
Hidden Problems In Popular Tax Filing Options
For various liability issues, I’m loathe to actually mention this company by name, but let’s say (for the purposes of this conversation) that there’s a big, popular company who made its fortune on the backs of lower-income taxpayers called H&P Black (a name picked completely at random). This company is flooding the airwaves with a brand new program offering "free" tax preparation.
Maybe you’ve heard about it? Well, like many such things, there are, shall we say … strings.
First of all, here are the restrictions: it only covers those filing the 1040EZ federal form, which covers only the very simplest tax issues. It can’t be used by anyone who has dependents, makes more than $100,000 per year, is age 65 or older, claims adjustment to income like alimony or tuition deductions, or itemizes deductions. Thus, homeowners who deduct mortgage interest or people with large charitable contributions can’t use the 1040EZ.
Plus, filers have to pay fees for state tax preparation and any other fees incurred — which have a tendency to pile up.
Asked by stock investors why [said company] was doing this, an executive replied: "Our ability to monetize this program means a minimal impact on our net average charge," [said company] Retail Tax President Phil Mazzini told analysts on Dec. 7. (source)
It’s always enlightening to look at executive interactions with stock analysts to see why public companies do what they do, I’ve found.
So — in summary: don’t be seduced by the siren call of getting something for nothing. You usually end up paying for it, in a whole host of ways.
In fact, one of OUR revenue centers over the years has always been in fixing the mistakes made by these "big box" retail tax outfits and off-the-shelf software programs, and discovering loads of missed opportunities and overpayments.
(Because, speaking of software: do you remember when our current Treasury Secretary used the leading tax software to do HIS taxes, unintentionally created a bunch of errors with it, and then blamed it for all of his tax problems in front of the Senate? Not an uncommon issue, I’m afraid.)
The old adage *is* an adage because it’s so often true: you get what you pay for. It’s the foundation for a stable economic system because it’s almost always true.
This List Will Help You
January 9, 2012 by Roger Menden, Shakopee Tax Professional
"A daily routine built on good habits and disciplines separates the most successful among us from everyone else." – Darren Hardy
Last week I wrote about financial resolutions — and, well, John Tierney of the New York Times must be a reader!
The columnist devoted a fantastic column to the keeping of resolutions and though he didn’t name me directly, he made a bunch of great points. I read this in the paper version, but I wanted you to see it online. In my opinion, here’s the key bit (my emphasis):
The study, led by Wilhelm Hofmann of the University of Chicago, showed that the people with the best self-control, paradoxically, are the ones who use their willpower less often. Instead of fending off one urge after another, these people set up their lives to minimize temptations. They play offense, not defense, using their willpower in advance so that they avoid crises, conserve their energy and outsource as much self-control as they can.
Alright — so perhaps he’s not talking about the automation and financial resolutions which I discussed! But I do hope you noticed what I emphasized there: sometimes our best method to stick to our resolutions is to not rely on our simple willpower — but to outsource it.
I’m running down some tools for you on this for next week, which I hope will help.
In the meantime (and speaking of outsourcing)… I truly do pity those who attempt to wade through all of the different tax codes and forms on their own, and not devote a week’s labor to the transaction. It really doesn’t pay to "go it alone" for certain tasks.
So, for those of you who want our help, I’ve put together a handy little list of what you’ll need to bring in. There may be certain situations where we’ll need other documentation to get you even more deductions. But, of course, we’ll let you know about that, should the situation arise!
Let me know your thoughts … and, of course, if you’d like to talk this over with us we’re here for you!
Roger Menden’s
"Real World" Personal Strategy
Menden’s Tax Time Document Chase List
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 everything you deserve to keep under our tax code.
Even if for some strange reason you won’t be using our cost-effective services this year, feel free to use this list as a handy guide…
Personal Data
Social Security Numbers (including spouse and children)
Child care provider tax I.D. or Social Security Number
Employment & Income Data
W-2 forms for this year
Tax refunds and unemployment compensation: Form 1099-G
Miscellaneous income including rent: Form 1099-MISC
Partnership and trust income
Pensions and annuities
Alimony received
Jury duty pay
Gambling and lottery winnings
Prizes and awards
Scholarships and fellowships
State and local income tax refunds
Unemployment compensation
Homeowner/Renter Data
Residential address(es) for this year
Mortgage interest: Form 1098
Sale of your home or other real estate: Form 1099-S
Second mortgage interest paid
Real estate taxes paid
Rent paid during tax year
Moving expenses
Financial Assets
Interest income statements: Form 1099-INT & 1099-OID
Dividend income statements: Form 1099-DIV
Proceeds from broker transactions: Form 1099-B
Retirement plan distribution: Form 1099-R
Capital gains or losses
Financial Liabilities
Auto loans and leases (account numbers and car value) if vehicle used for business
Student loan interest paid
Early withdrawal penalties on CDs and other fixed time deposits
Automobiles
Personal property tax information
Department of Motor Vehicles fees
Expenses
Gifts to charity (receipts for any single donations of $250 or more)
Unreimbursed expenses related to volunteer work
Unreimbursed expenses related to your job (travel expenses, entertainment, uniforms, union dues, subscriptions)
Investment expenses
Job-hunting expenses
Education expenses (tuition and fees)
Child care expenses
Medical Savings Accounts
Adoption expenses
Alimony paid
Tax return preparation expenses and fees
Self-Employment Data
Estimated tax vouchers for the current year
Self-employment tax
Self-employment SEP plans
Self-employed health insurance
K-1s on all partnerships
Receipts or documentation for business-related expenses
Farm income
Deduction Documents
State and local income taxes
IRA, Keogh and other retirement plan contributions
Medical expenses
Casualty or theft losses
Other miscellaneous deductions
We hope this helps, and we really look forward to seeing you this year!
++++++++
To your family’s financial and emotional peace…
Shakopee Accountant On: “My Financial Resolutions”
January 2, 2012 by Roger Menden, Shakopee Tax Professional
"It is in your moments of decision that your destiny is shaped."
- Anthony Robbins
This first full week of the year is often cited as one of the most difficult and depressing weeks of the year. Far from shiny newness, experts say that with all of the let-down after the holidays, coming back to work, or leaving behind family, can bring a heightened sense of loss. That, combined with the fact that we’re staring at 2-4 months still left of winter (depending what part of the country you call home, of course–we have clients and friends reading this from across the country)…
Well, it can be a tough week.
So, I thought we would lighten the load for you in two ways:
Firstly, I was sent this extremely funny short video the other day. Now that the holiday season is over, what better than to laugh at it? We just got bombarded with a ton of "Top __ of 2011" lists, but I’m not sure this video was on any of them. If you want a quick pick-you-up, here’s a funny prank pulled on helpless Target employees on Black Friday last: http://www.youtube.com/watch?feature&v=CYbVpAwGGGs
Check it out, then you will want to come right back to me when you’re done.
Alright, funny time over. The second way I’d like to lighten your 2012 load is by giving you some simple, actionable guidance on FINANCIAL resolutions which are easy (and profitable) for you to keep.
You see, I hope you don’t mind that I see it as my role in your life to not only provide authoritative and actionable tax advice for your specific situation, but also to play a role as a "coach" for your finances, and even your mindset.
This is why our clients and their friends seek us out for *more* than simple tax preparation, but a whole host of other services as well–from planning, to business services, to simple encouragement. I get to be someone in your life who says: "You can do this. You’re not alone."
It’s my great hope that our relationship will continue to grow into 2012, and beyond. And not just for "business purposes". We love our clients — you’re like family to us (the *good* kind of family, that is)!
So, with my coach hat firmly in place, here are some thoughts for effectively creating and pursuing your personal financial goals, as we move into 2012…
Roger Menden’s
"Real World" Personal Strategy
Menden’s Financial Resolutions for 2012
Here’s the thing about most financial resolutions: They don’t usually last even until the end of January. That’s because making a permanent change in our behavior requires both time and a steely resolve. But I’ve found that we can develop financial character one action at a time.
So in that vein, here are some financial practices to take you from pauper to prince or princess if you add one each year. If you’ve already got one down, move to the next on the list.
#1 MOST CRITICAL: Resolve to become (and stay) debt free. Now, I’m not Dave Ramsey, but there’s a reason why he’s become so popular: his approach works. I’d say that you can have a fixed-rate fixed-year traditional mortgage on your house — but nothing else, please. No equity line of credit on your house. No car payments. Certainly no credit card debt. Because you simply have to learn to live within your income — which, unfortunately, sometimes means going without. The millionaires among us really are frugal. So learn to enjoy that process, and it’s a fantastic start.
#2 Automate your savings (AKA Pay Yourself First). You can start by getting the entire match if your company offers a 401(k) plan. Usually this translates to saving 5% of your salary while the company contributes a 4% match, which is the fastest way to get an 80% return on your money. Most Americans forgo this match, believing they need to spend 100% of their salary. But you can learn to think like a millionaire and live well on 95% of what you make. If you don’t have a 401(k) plan, act like you do, and sock away 5% automatically.
#3 Fully fund your 2012 Roth IRA. This is $5,000 in 2012 and $6,000 if you are older than age 50. If you can’t manage the entire amount in January, put in $416 monthly. Automating deposits in an employer-defined contribution plan is easy. Fortunately, automating saving in a Roth IRA or a taxable savings plan is equally painless. Most brokers offer an automatic money link between your checking account and an investment account. Set your savings on autopilot, baby!
Remember — these steps build off one another, so if you already have done the first 3, here’s your next step:
#4 Save another 5% in a taxable investment account. Automating savings is great, automating investment is even greater. Key word here: automate. At this point, you’re hitting a mark of saving 15-20% of your income. That’s a fast-track to long-term prosperity.
But I’m not quite done, grasshopper. However, I’m going to leave you with these for now, and come back to this again in the weeks ahead.
Happy New Year!
This Is The Last Week …
December 26, 2011 by Roger Menden, Shakopee Tax Professional
"Life consists not in holding good cards but in playing those you hold well."
- Josh Billings
I woke up Monday morning, after the wonderful holiday weekend … and I had a realization: after today, there are only FIVE days left in 2011.
Perhaps not a genius realization — fine. BUT, if you’re smart about how you handle these days, you can pay yourself quite well, when tax time rolls around.
The VERY good news is that we’ve been able to clear out three "FAST ACTION" appointment slots this week only for clients and friends who are committed to following our advice quickly, and who want ensure that their tax bill for the 2011 tax year is the lowest it can possibly be.
There are a veritable slew of beneficial tax provisions which are expiring on Saturday night, and some of them can still be leveraged. And with the payroll tax cut deal being struck, there aren’t any last-minute shenanigans from Congress for all of us to worry about!
For a list of them (some of which is technical, but it’s all pretty clear), see here:
http://www.journalofaccountancy.com/Web/20114945.htm
Email me to snag a Fast-Action Appointment, or call: (952) 445-8753 — and may I suggest you do it quickly? These slots are sure to go fast. After that point, you’ll be put on a short waiting list.
But for those of my clients and friends who prefer to "do it yourself" (though with THIS tax code, I’m not sure that’s always wise), I’ve put together a brief, and actionable "checklist" to ensure that you’re squeezing every last drop out of the deductions available to you for 2011.
And, on the early note — let me wish you a premature Happy New Year, 2012!
Now, let’s get deducting…shall we?
Roger Menden’s
"Real World" Personal Strategy
Ultra Last-Minute Tax Moves for 2011
Because time is short, and some moves do require more than this week to pull off, I’m restricting myself to those items which you can realistically affect before the end of the year.
This will be short, and (hopefully) sweet to your wallet…
1) Use Your FSA Funds
Money set aside in a flexible spending account must be spent by the end of the year, else the funds are lost. Some employers allow a 2-and-a-half month grace period. So check with your employer to see what your personal deadline is for utilizing your FSA savings.
2) Make an Extra Payment on Your Mortgage
If you own a house with a mortgage, and you can swing the cashflow hit, add an additional payment before year-end, and the interest on that payment will be deductible for 2011. Of course, that means that it WON’T be so for 2012, but perhaps you can use this as an "extra" payment … and get ahead of the escrow game.
3) Make the Switch to a Roth IRA
Roth conversions are taxed in the year the conversion happens. However taxpayers have the option to undo part or all of that conversion by their filing deadline. But in order to retroactively undo part of their conversion next year, they first have to convert this year. So if you are on the fence about converting, consider taking the plunge before the end of the year knowing that you (and/or WE) can re-characterize some or all of the amounts early next year.
4) The old standby
You know how I feel about charitable giving by now (I hope). This week, of course, is a big one for non-profits who are the happy beneficiaries of last-minute donations. You can pay early on a monthly gift, or give a lump-sum gift. The purpose (aside from the many, many benefits to the organization, and to you), of course, being to knock you into a different tax bracket, perhaps, or to simply cut your tax bill, regardless of the bracket status. Note: This is the LAST year where charitable donations from an IRA are handled generously.
Now, there are plenty others. But these are the quickest, and the easiest (aside, perhaps, from the Roth conversion — but that can be done quickly).
Do you have others you want to explore? Give us a call (952) 445-8753 or shoot me back an email, and we’ll help you out.
Best to you! We’d love to see your family THRIVE in 2012!
“My Holiday Prayer” Shakopee Accountant Explains
December 19, 2011 by Roger Menden, Shakopee Tax Professional
"People travel to wonder at the height of the mountains, at the huge waves of the seas, at the long course of the rivers, at the vast compass of the ocean, at the circular motion of the stars, and yet they pass by themselves without wondering." -St. Augustine
It seems that every year around this time that we tax professionals cast our gimlet eyes on Congress, and wait for them to resolve their year-end business — which ALWAYS affects our work.
Well, ho ho ho … this year is no different! As of this writing (Monday morning, December 19th), we’re seeing the payroll tax cut (worth up to $1K for many working families) be batted around. (A news article on it: http://on.wsj.com/sEufja )
We’ll keep you posted with the relevant details, as well as other, hopefully-pertinent information (you never know, with Congress!).
Anyway, I came in to the office this morning, and I noticed that traffic is already a little "lighter" around town. Many of us are still working, but I know of plenty of folks who have already taken time away from work, starting today.
Whatever your faith background, it’s hard to ignore the holiday clamor. In my opinion, it’s a crying shame that a season of reflection and prayer (Christmas, Hanukkah, etc) would become transformed into something so… busy. It’s almost as if we now have to rush around to "purchase" or artificially create nostalgic moments, when they would happen on their own before.
Now look — as a proud business owner, I’ve got no problem with people earning money during this season…I just wonder when it’s time to say "enough"?
But enough holiday ranting. This week, while everyone else is attempting to slow down, we tax professionals are gearing up. I thought I would take a break from my usual "financial" strategy tips, for the holidays, and pause a moment for reflection with you.
Because as I’ve been meeting with tax clients in getting ready for the season, I’ve discovered that many of you are worried and stressed–about finances, family, personal circumstances, etc. It’s not my job to save the world on your behalf of course, but I do get to be somebody in your world that can encourage you to slow down, take a breather and keep your perspective on what’s really important.
Thanks for your friendship, and for your business in 2011, and (hopefully) in 2012!
This week’s Note is to help us all keep perspective, this week…and into next year.
Roger Menden’s
"Real World" Personal Strategy
A Holiday Prayer For All Of Us
"God, help us remember that the jerk who cut us off in traffic last night is a single mother who worked nine hours that day and is rushing home to cook dinner, help with homework, do the laundry and spend a few precious moments with her children.
"Help us to remember that the pierced, tattooed, disinterested young man who can’t make change correctly is a worried 19-year-old college student, balancing his apprehension over final exams with his fear of not getting his student loans for next semester.
"Remind us, Lord, that the scary-looking bum, begging for money in the same spot every day (who really ought to get a job!) is a slave to addictions that we can only imagine in our worst nightmares…
"Help us to remember that the old couple walking annoyingly slow through the store aisles and blocking our shopping progress are savoring this moment, knowing that, based on the biopsy report she got back last week, this will be the last year that they go shopping together.
"Father, remind us each day that, of all the gifts you give us, the greatest gift is love. It is not enough to share that love with those we hold dear. Open our hearts not to just those who are close to us, but to all humanity. Let us be slow to judge and quick to forgive, show patience, empathy and love. "
Best to you! May your season be truly bright.
Shakopee Accountant: “I’m A Myth-Buster”
December 12, 2011 by Roger Menden, Shakopee Tax Professional
"If you love life, don’t waste time, for time is what life is made up of." – Bruce Lee
Scattershooting around the tax world while simultaneously preparing for a sure-to-be-busier tax season (thanks for all the recent referrals — keep ‘em coming!) AND navigating the perils of another holiday season … well, it means one busy Roger!
Seriously, we’re getting excited about what is our most intense season of the year — TAX time. In between cookies and egg nog, we’re boning up on all of the official tax law changes, and meeting with clients for last-minute tax-planning.
A few quick tax items for you, in fact, before I get to the good stuff:
IRS might have some refund $$ for you: There’s $153 million unclaimed right now. So, if you were expecting a refund check and fear it might have been returned to the IRS as undeliverable, go to the IRS website (www.irs.gov) and use the "Where’s My Refund?" tool. This will give you the status of your refund. In some cases, it will also provide "instructions on how to resolve delivery problems." You can also can get a phone version of "Where’s My Refund" at (800) 829-1954.
A friendly reminder: Use those FSA funds in the next few weeks … or lose ‘em! No explanation necessary, methinks.
Now… on to something which might just serve as a friendly nudge: "Tax time" is the perfect time for you to get other, long-delayed financial tasks accomplished. One of these is the dreaded estate plan. This is something which every family should have in place — not just the 1% (if you will). In fact, there are some myths about preparing estate plans which I thought we should deconstruct together, today.
(And as I mentioned — preparing to set up one of these plans is much easier in the context of what you normally do in preparing for tax season … so, let us know how we can help you with it!)
Roger Menden’s
"Real World" Personal Strategy
Two Common Estate Plan Myths — BUSTED
As of this writing, it’s a fact that almost 60% of Americans don’t have a basic will, and that’s a big problem.
One of the big reasons that most families don’t yet have this kind of plan in place is because of some incorrect thinking about whether it’s right for them, or if it’s even necessary. And sure –some people just haven’t gotten around to creating a will or trust. Others think they don’t need an estate plan because they’re not "rich".
But here’s the problem–if you continue without an estate plan, you could leave a legacy of bad feelings and attorneys’ fees.
So I wanted to speak to some of the more common misconceptions out there. I’ll start with a couple big ones this week, and when the time is right, address a few more in 2012…
MYTH #1: Only rich people prepare estate plans.
Do you own ANYTHING? Because if so, you need a will. You see, a will allows you to designate who will receive your property should anything happen. Continuing without one ensures that your assets will be distributed under the terms of your state’s "intestate succession" laws. That means your money and property could end up with family members you haven’t spoken to in years, instead of who you’d really like to see control your assets.
I won’t go into all of the different components of a will, trust, health care directive etc., as my purpose here is to emphasize that failing to plan is simply a decision to trust your assets to government bureaucrats who don’t know you from Adam.
Even if you think your situation is pretty straightforward, you may feel more comfortable hiring a lawyer to guide you through the process.
MYTH #2: Everything goes to your spouse, if something happens.
Unfortunately, that’s not always the case. We deal with clients from different states around the country, and state laws vary. In fact, in most states, if you continue without a will (intestate), your inheritance will be divided among your spouse and your children. In New York, for example, when someone dies, the spouse gets the first $50,000 of the estate and what’s left is divided 50-50 among the spouse and the children.
You can imagine how this could create all kinds of problems, particularly if your spouse was financially dependent on you or you have children from a previous marriage.
I’ll send a few more in the future, but I hope you can already see that things are not always as we "think". And let’s take advantage of tax season and move towards getting this done (or updated) in 2012!
I hope this helps! To your family’s financial and emotional peace…
Shakopee Accountant On: “How To Handle All These End-Of-Year Giving Requests”
December 5, 2011 by Roger Menden, Shakopee Tax Professional
"The only way to get positive feelings about yourself is to take positive actions. Man does not live as he thinks, he thinks as he lives."
- Vaughan Quinn
The other day, I received probably the 20th "Consider including _____ in your holiday giving plans" request of the season. I’m not tired of it (in fact, I welcome it), but it’s also pretty clear that these 501(c)3 organizations all sort of "get" simple tax planning!
So as a tax professional, it warms my heart to see all of that deductibility flying around through mailboxes and the interwebs, and I’m especially happy when I see clients step to the plate and actually give.
Last week, I wrote about those inevitable "last-minute tax moves" we tax professionals always spout off about around this time of the year, and (surprise, surprise!) one of the options was increasing your donations.
But I wanted to address this a little more specifically — because donating for tax purposes is good (VERY good) … but there are better reasons. In fact, the current White House administration continues to scrutinize reducing the deduction rate for charitable donations, as it seems to do every year around this time.
So we might as well consider what it would look like to give with a smaller tax deduction incentive for doing so (though I should hasten to add that these proposals are not yet set into law).
Roger Menden’s
"Real World" Personal Strategy
3 Reasons To Give Money Away, With or Without a Tax Deduction
There’s something that happens to your soul when you cut a big check to someone in need.
You signal to those very fears and desires which so often control your unconscious thoughts: "Money doesn’t rule me. I have more than enough, so much more than enough that I’m giving it away." Then, of course, something special often happens: more money seems to find itself in your hands.
I’m not advocating a mystical pay-it-forward scheme; I’m simply making the observation over years of being a student of how money "works". And, "coincidentally" it just seems to find itself in the hands of those who give it away.
Why is it that those who are benevolent seem to be well-taken care of, even rich? I know many families of significant means who were NOT wealthy when they started to give in large percentages of their income (15%+). Coincidence?
So I’d say that this first dynamic is one significant reason to give: Your soul is set free from the shackles of fear and greed.
Here are two more big reasons:
2) You build a network of grateful friends and organizations. You’ll never know when someone to whom you’ve donated or given (be it time, money, connections, or other resources) comes back to you with something you need, at just the right time.
Personally, I’ve seen this dynamic in play enough times to not dismiss it. When you act or give generously, it’s the most powerful form of networking on the planet. Obviously, there are better, less self-interested reasons to give … but there sure are worse ones.
3) Your perspective can shift in an instant. When you don’t just give money, but also time and heart, you often learn heretofore unrealized reasons for being grateful about your own present circumstances.
Sometimes giving to institutions that work with the poor can bring home appreciation of your own enormous wealth. And it can also bring home awareness of a poverty which isn’t solved through adding zeroes to a bank balance. But either way, if you do it right, you are changed for the better.
With these reasons, AND the monetary benefits to your tax return, I urge you: stretch yourself this month. Give more than you think you should. See what happens.
I promise it’ll be good.
All this said, above, I firmly advocate for being careful with your planning of said giving. I don’t suggest impulsivity, just some small risk-taking.
But don’t risk losing out on the tax advantages to gifting appreciated stock, or other, less common, forms of gifting. Shoot me an email, or give us a call (952) 445-8753 if you want to discuss the tax implications of your year-end giving. It is, after all, what we do.
“Make These Moves This Month” Shakopee Accountant Advises
November 28, 2011 by Roger Menden, Shakopee Tax Professional
"The way we communicate with others and with ourselves ultimately determines the quality of our lives." -Anthony Robbins
Hey, maybe my readers of last week’s Black Friday tips REALLY took it to heart! Apparently, sales from that day were up a whopping 16% from last year, which, as I write this on Monday morning, is driving the stock markets up, up, up.
Of course, this may not quite be the indicator we all might hope it to be — after all, Black Friday is notorious for big sales and for penny-pinchers. I might feel better about our economy’s direction if we get a few quarters of sustained consumer spending, outside of the big sales, under our belts.
This week, I’m hoping you will take my advice equally to heart. With just about one month left in 2011, there are some moves you simply must make. Why? Because right now, the tax picture for 2012 is extremely murky. Congress has just under five weeks to consider a TON of legislation and expiring credits (here’s a list, in case you’re interested: http://www.bankrate.com/financing/taxes/congress-year-end-tax-tasks/ ).
So the smart money should be leveraged to take maximum advantage out of this year’s tax situation. Because the way our political situation is shaping up … well, the only certainty right now seems to be UNcertainty.
The following is how you can make some CERTAIN tax-saving moves — but I will say this: if your income looks to be over $75K this year and you will have significant deductions, then we really should touch base for a planning conversation to ensure you don’t get hit by the AMT.
952-445-8753 or email me rmenden@mendenaccounting.com.
After you’ve done that, read on.
Roger Menden’s
"Real World" Personal Strategy
Menden’s Year-End Tax Moves for 2011
As promised, I’ve compiled some information on expiring tax breaks for 2011, as well as some suggested moves to make before December sees its ball-dropping end.
But before I share them with you, please allow me this important disclaimer: it’s difficult to make blanket recommendations to all my clients, simply because everyone’s situation is different. If you are uncertain about taking action on any of this information, well, that’s why we do tax planning — so give us a call in that instance (952-445-8753).
Disclaimers aside, here are some relatively-easy tax moves you can make before 2012:
Filed under: Increased-Deduction strategy
With one caveat: increasing deductions could cost you if you end up owing under the Alternative Minimum Tax (AMT).
1. Pre-Pay and Accelerate
Mortgage bills, college tuition, property taxes — all of these can add deductions to your bottom line, so cherry-pick some 2012 bills if cashflow allows, and you’ll get to mark them against this year’s taxes (only January’s mortgage payment counts for this, I should hasten to say).
And you can "accelerate" certain expenses like optional medical procedures (dentistry is always a ripe source for procedures to implement, unfortunately ?), again, doing so if cashflow allows.
2. Donate
It’s not just because ’tis the season, but often (if we’re all honest) because the year-end is so close. So, obviously, when it comes to taxes, giving to a nonprofit can be like a money-saving gift to yourself. If you itemize your deductions, you can claim your charitable donations, both of cash or goods.
In fact, if you’re *close* to being able to itemize deductions, making some nice gifts this month can push you over the top into some major tax-savings. And, of course, there’s the added benefit of what happens to YOUR mindset when you give.
Filed under: Buying stuff you already need — and saving on taxes
3. Energy-Savings and Big Cars
We ‘tax people’ have been pounding this drum for a while, for the simple fact that (because of the last "stimulus" package) replacing windows, doors, and HVAC systems– as well as installing new insulation–could net you a $500 tax credit on your 2011 tax bill! Credits always beat deductions. A solar energy system gets a 30% credit with no upper limit.
How about that fancy new vehicle you’ve been eyeing? Or that energy-sucking flatscreen? Buy it before the end of the year, and you are eligible for a deduction on the state and local sales taxes.
But you can’t deduct both state income taxes and general sales taxes, so the deduction is usually most beneficial to our clients who actually live in the no-income-tax states. By the way, this sales tax deduction is scheduled to expire on Dec. 31.
Filed under: Common sense
4. Please stop loaning extra funds to Uncle Sam
Do you intentionally get a big refund each filing season? Quit that! You’re providing Uncle Sam an interest-free loan of your money.
Submit a new W-4 now so that your payroll withholding is more closely in line with your future IRS bill. It could even give you a few extra dollars at the end of the year to spend on holiday gifts!
Oh, and just so you know, it’s growing very likely that whatever Congress decides on tax law changes, payroll calculators may not have time to update by January 1st. This means that even if you request the changes, your withholding may not reflect things until 2012 … but making the change will still impact your taxes — it just might not be obvious until next year..
I hope these are easy, and that they give you some good ideas. Remember– I’m in your corner!
And when in doubt, give us a call.
Shakopee Accountant On: “Betting On Black”
November 21, 2011 by Roger Menden, Shakopee Tax Professional
"95 percent of your emotions are determined by how you interpret events to yourself." – Brian Tracy
You know how Thanksgiving got its start, don’t you?
Smack in the middle of horrendous civil war, President Lincoln proclaimed the last Thursday of November as a national day of Thanksgiving which should take place every year.
I believe Lincoln understood a fundamental truth in the human soul: how we choose to see our circumstances often dictates the state of our hearts — and, thereby, our future circumstances. After all, if a war-torn nation can turn its eyes upward — so can you and your family.
You should sit in my office with me sometime, watch the procession of "wealthy" and "poor" clients meeting with me and my staff over various problems — and watch how the hearts are activated. Sometimes my "wealthiest" clients are the most impoverished … and those without many zeroes in their accounts are flat-out rich.
"Rich" is a state-of-mind–and it’s tied to gratitude. It affects how you see savings, retirement, our current economy, and investment. And, of course, gratitude is the enemy of fear. It’s like an opposite magnet for it — walk in gratitude, and fear just melts away.
So, here’s my advice for this week: Whatever financial situation you happen to find yourself in, be thankful. There are hidden blessings in any trial … and hidden fears lying within any windfall. Find them, savor the blessings, and watch your family thrive.
Now, perhaps this the perfect segue into my actionable advice for this week — because though I’m a professional in tax-savings, I like to find ways for my clients to find savings all over the place. And aside from turkey, there’s this whole "shopping" thing which is pushing up against our football! Well, I scanned around online, and I’ve compiled some of the BEST (i.e. not-just-conventional) advice for starting the holiday shopping season with a bang…
[By the way, as I write this, the "debt supercommittee" is headed towards failure. You KNOW that means that the IRS will be under serious pressure to collect maximum tax from you, right?
Roger Menden's
"Real World" Personal Strategy
Menden's Black Friday Winning Tactics
Personally, I prefer avoiding this mess altogether, but I just KNOW that many of my clients feel differently. So, if that's you...here you go:
Expect some Black Friday sales to start on Thursday. Many retailers will start offering discounts online on Thanksgiving day. And some, such as Amazon, will offer Black Friday deals several days before November 25 -- so hot items may sell out before the big shopping day after Thanksgiving. And, as you've probably seen, some stores (like Target) are even opening on Thursday...
Don't assume the best deals are only in the stores. It's a tradition for a lot of people to get up at the crack of dawn and camp out in front of stores to scoop up deals. But a lot of "doorbusters" (those deeply discounted items retailers use to get consumers in the door early Friday) will be available online, too -- especially on big-ticket products. And if an Apple product is on your gift list, you'll probably find it for less online (at Amazon.com, MacMall.com or MacConnection.com) than at an Apple store -- AND you may escape sales tax on your purchase [I just had to get that one in there, as a tax pro!].
Only brave the crowds if you’re trying to snag an extremely limited item. You have a better chance of getting the deal if you go to the store – and are first in line. Keep in mind, though, that the items which are marked down dramatically are often cheap items to begin with – not top-selling, name-brand products.
Black Friday is only the beginning. In fact, the best deals on apparel usually appear on Cyber Monday (November 28 this year), when retailers discount items online. Toys will be cheaper the first two weeks of December when Walmart and Amazon go to war with each other to offer the lowest prices and clear out inventory before Christmas. And the best deals on name-brand TVs and luxury items can be found in early December, too.
Watch out for return policy shenanigans. Some retailers tighten their policies around the holidays as a way of compensating for all that discounting they’re up to. Some charge restocking fees if you bring an item back. And some won’t let you exchange items which were manufactured specifically for Black Friday (to be sold at a low price).
This one is pretty universal: Never spring for extended warranties on big-ticket items. There’s a good chance that a salesperson will try to talk you into paying extra for an extended warranty if you purchase a big-ticket item on Black Friday. That’s because revenue from extended warranties helps make up for lost profits on these discounted items. Typically, you’ll pay 10% to 20% more for an item to extend a one-year manufacturer’s warranty through the fifth year of ownership. But most major appliances do not break down within the extended-warranty period. Plus, you might already be covered if you use your credit card to purchase an item.
Just doing my little part to help YOUR economy-stimulation efforts this holiday season get the most bang.
Next week, I’ll have some urgent information on expiring 2011 tax breaks. Until then…
HAPPY THANKSGIVING!
