“Real World” Personal Strategy Blog
Procrastinators welcome
March 31, 2010 by Roger Menden
“We are what we repeatedly do. Excellence, then, is not an act, but a habit.”
- Aristotle
The dust is beginning to settle over the now-signed Health Care Reform legislation.
There’s a lot in there *besides* health care–items which affect regular families, employers (and employees) and, of course, insurance plans. As promised, we’ll notify you of more details and try to give it to you straight–and in the “real world.”
But right now, we’re nearing the end of the “4th quarter” for tax season, and (believe it or not) there are clients AND other regular families who haven’t yet contacted us.
If this is you: Email me or call right away. If you’ve already made plans to get your taxes completed, I’d like to know about it.
And…if you haven’t, you’ll be given priority status, and we’ll go to work!
It’s very important to me that we give our existing clients, and contacts, the highest priority service every year–it’s just another small “perk” for staying with us, and referring your family and friends.
“Real World” Personal Strategy
Can Procrastination Be Good?
The most impressive people I know are all terrible procrastinators. So could it be that procrastination isn’t always bad?
You see, 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: (a) nothing, (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 letters, 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.
Now what?
March 23, 2010 by Roger Menden
“It’s income tax time again, Americans: time to gather up those receipts, get out those tax forms, sharpen up that pencil, and stab yourself in the aorta.”
- Dave Barry
Every year, around this time, I find myself blogging about “procrastination” and its dangers, as well as observations from tax season thus far.
But this year is different.
I’m writing this blog on Tuesday morning, and the other night the House of Representatives approved the Senate version of Health Care Reform…and it will soon be law. It’s been a drawn-out fight, and it hasn’t been very pretty–but all of us will now have to adjust to these laws. Keep it here (so to speak), and over the next few weeks and months, we’ll deliver insight as to what this means for YOU, your family, and your job.
All of the details aren’t yet completely clear, but as they become so, we’ll walk alongside you to ensure you’re informed…and that our clients take the most advantageous tax position possible in this new landscape. One thing *is* clear: the IRS will have even more power than before, as many of the proposed regulations are tied into the tax code.
Again…we’ll stay on top of this, so you don’t have to. It’s part of the service we provide our clients and our community through these weekly blogs.
But given the fact that this legislation has been so exhausting to follow…how about we take a little break from it, shall we? Instead, in this week’s Strategy Note, I’m shifting gears significantly and offering some advice for the yearly ritual which we come to at this time (besides taxes)…this advice is adapted and collated from a variety of resources–I’m a tax expert, after all, not always a cleaning expert!
“Real World” Personal Strategy
Avoiding Dangerous Spring Cleaning!
Many parts of the country (including around here!) are already warming up to spring…and that means spring cleaning.
But have you ever considered what you’re using to clean your home, and if it’s really safe for your family? The problem with cleaning products is that there is very little regulation and virtually no labeling requirements.
“A lot of cleaning products contain toxic ingredients that aren’t properly regulated, disclosed, or in some cases even tested,” said Sara Mohs, co-founder of simplyneutral, a company that promotes sustainable living through non-toxic cleaners.
In fact, most household cleaners are produced using a petroleum-based formula. That’s right, petroleum! In addition, they typically include chemicals, fragrances, and dyes that can be irritating to your eyes, skin, and respiratory tract.
So, here’s a list of natural alternatives that work great and are probably already in your pantry:
Baking soda – We all know that baking soda absorbs odors, especially in refrigerators, but did you know it’s also a simple and effective cleaner? Just mix baking soda with warm water for an inexpensive cleaner comparable to commercial “abrasive” cleaners.
Vinegar - White vinegar is actually a deodorizer and a disinfectant…making it a great all-purpose cleaner. Avoid using vinegar solutions on marble or grout, but it’s perfect for all of the other surfaces in the kitchen and bathroom.
Lemon juice - Use lemon juice on hard-water stains, soap scum, even rust stains in the shower, tub, and toilet. Mix lemon juice with salt to remove stubborn stains from coffee pots. Or you can mix lemon juice with baking soda for a softer, paste-like cleaning solution. Add a little to olive oil for an effective wood polish. Blend it with water to make a potent air freshener.
Cornstarch – Cornstarch makes an effective glass and surface cleaner. Plus, you can combine 2 tbsp of cornstarch with 3/4 cup of baking soda for an inexpensive carpet freshener.
Borax - Also known as sodium borate, borax is best known as a hard-water laundry soap, but it also cleans wallpaper, painted walls, and other painted surfaces.
I hope this helps.
Just making sure…
March 16, 2010 by Roger Menden
“Obstacles don’t have to stop you. If you run into a wall, don’t turn around and give up. Figure out how to climb it, go through it, or work around it.”
- Michael Jordan
Well, we’re nearing the home stretch in tax season. Since the deadline for individuals (April 15th) is just under a month out, we’ve been “packing them in” around here!
I’ll tell you what … one of the main reasons we love tax season around here is that we get to sit down with such incredible people. I’ve truly been reminded of how grateful I am for the clients we’ve got this year–and for your trust in us during these “unusual” times.
For this week’s Note, I’m re-addressing a question we get a LOT this time of year–”what do I need to bring you for my taxes?”
“Real World” Personal Strategy
Ensuring You Don’t Miss Anything at Tax Time
In early January, my blog included a ”checklist”, and it was one of our most popular blogs. I guess it was handy!
Putting together this list may run slightly counter to my business goals–after all, we do get paid to do this on behalf of clients! That said, our mission is to ensure that EVERYONE in our area saves the most possible when the IRS comes calling! Some of these may seem small, but trust me when I say that they add up.
So…even if for some strange reason you won’t be using our cost-effective services this year, and because we’re getting so close to April 15th, here it is again for you: what you’ll need to prepare your taxes…
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
While some of these may seem like “pocket change”…just a few minutes of effort can pay a nice hourly rate! And, better in YOUR pockets than in Uncle Sam’s, right?
So, I hope this helps.
Commonly-overlooked breaks
March 9, 2010 by Roger Menden
We are not in a position in which we have nothing to work with. We already have capacities, talents, direction, missions, callings.
- Abraham Maslow
We’re getting closer and closer to D-Day (April 15th: “Done Day”) around here, and we’ve already had quite a tax season. This truly is our favorite time of year–we get to sit down with our friends and help them discover that the dread they were expecting when all was said and done…well, it wasn’t as bad as they feared!
We love the look on clients’ faces when they find out they have a refund waiting for them… though they expected to pay. Or, when they discover that the bill wasn’t nearly as bad as feared. And, of course, we mostly enjoy the face-to-face interaction with folks with whom we’ve been mostly interacting by phone or email.
So, if you’ve been putting it off…please don’t delay! Good things are in store for you when you “get ‘er done!”
This week, I wanted to make sure you knew about deductions which we routinely “discover” during these face-to-face sessions. I won’t be revealing any “trade secrets” here–but they’re common enough that even the best software can let you down (unsurprisingly).
Read on, and leave your feedback!
“Real World” Personal Strategy
Don’t Miss These 6 Commonly-Missed Deductions
Putting together this list may run slightly counter to my business goals–after all, we do get paid to do this on behalf of clients! That said, our mission is to ensure that EVERYONE in our area saves the most possible when the IRS comes calling! Some of these may seem small, but trust me when I say that they add up.
So, before you file those taxes, make sure you’ve considered…
1. Beyond Charitable Gifts
Most everyone remembers to count the monetary gifts they make to charities. But do NOT forget that expenses incurred while doing charitable work can be deducted effectively.
You can’t deduct the value of your time spent volunteering, but if you buy supplies for a group, the cost for the goods is deductible. Or, if you wear a uniform while volunteering (for example as a hospital volunteer or youth group leader), the costs of that apparel and any cleaning bills also can be counted as charitable donations.
So can the use of your vehicle for charitable purposes, such as delivering meals to the homebound in your community or taking the Scout troop on an outing. The IRS will let you deduct that travel at 14 cents per mile.
2. Certain Job-Hunting Costs
Yes, college students cannot deduct the costs of hunting for that new job across the country… but already-employed workers can! Most costs associated with looking for a new job (in your present occupation), including fees for resume preparation and employment of outplacement agencies, are deductible — as long as you itemize. The trick, as with other itemized expenses, is that these costs (along with other misc. deductions) must exceed 2 percent of your adjusted gross income before they produce any tax savings. But the phone calls, employment agency fees and resume printing costs might be enough to get you over that income threshold.
3. Summertime Day Camp, Dependent Care
Millions of working parents know to claim the Child and Dependent Care Credit. But some parents overlook claiming the tax credit for child care costs during the summer. This tax break applies to summer day camp costs! The key here is that the camp is a day-only getaway that supervises the child while the parents work. Unfortunately, you can’t claim overnight camp costs (too bad, for camp directors!).
Remember, also, this can be for children AND other dependents. If you have an adult dependent who needs care so that you can work, those expenses can be claimed under this tax credit.
4. Deductible medical costs
Many taxpayers don’t even shoot for these, because of the 7.5 percent of adjusted gross income threshold required before you can claim any medical expenses. However, it’s easier to clear that hurdle if you don’t overlook “miscellaneous” medical costs. Some of these include: travel expenses to and from medical treatments, insurance premiums you pay for from already-taxed income and even alcohol or drug abuse treatments.
Further, self-employed taxpayers who are not covered by any other employer-paid plan (like one carried by a spouse), can deduct every cent of health insurance premiums as well, “above the line” on the 1040 form!
5. Retirement tax savings–more than just the IRA
There’s a credit called “The Retirement Savings Contribution Credit” which was created to give moderate- and low-income taxpayers an incentive to save. When you contribute to a retirement account, either an IRA (traditional or Roth) or a workplace plan, you can get a tax credit for up to 50 percent of the first $2,000 you put into such accounts. This means you get a $1,000 credit–much sweeter than a simple deduction!
6. “Green” home improvements
Whatever your opinion of “climate change”, the tax code has an opinion–and it wants you to agree to the tune of paying you! You can now claim a possible credit of up to $1,500. This covers such relatively simple things as adding insulation, energy-efficient exterior windows and energy-efficient heating and air conditioning systems.
While some of these may seem like “pocket change”…just a few minutes of effort can pay a nice hourly rate! And, better in YOUR pockets than in Uncle Sam’s, right?
So, I hope this helps.
Audit-proof your life
March 4, 2010 by Roger Menden
“The past does not define you, the present does.”
- Jillian Michaels
I hope your weekend went well–our family has been enjoying the Olympics, and, in particular, many of the stories which go with it.
If you’ve paid any attention, you probably heard about American, Lindsey Vonn. She’s known as perhaps the world’s top female skier having dominated the World Cup the last couple years–but she entered these Olympics with a serious shin injury which left her hopes seriously dimmed.
Well, in her first event, she came through.
And the sheer explosion of joy when she saw her time…well, it will bring tears to your eyes. Watch it here:
http://www.nbcolympics.com/video/assetid=04fb8dfd-11ac-413d-88ad-efb130f93ebd.html#emotional+victory
It’s stories like this which always make the Olympics compelling, in my opinion–the story of lives in pursuit of an audacious goal.
Now…there’s stories like this, and, of course, the stories of our own lives which capture most of our attention. And here’s a BAD chapter to live through: an IRS audit.
We’ve dealt with this for clients in the past, and it’s never fun. So, with that in mind, I’ve put together some excellent ways to MINIMIZE your chances of getting audited. Unfortunately, I can’t *guarantee* that you would never get audited…but following this advice will significantly reduce your chances.
Read on, and leave your feedback!
“Real World” Personal Strategy
8 Ways To Keep The IRS Audit-Hounds at Bay
1. Don’t make indefensible claims
There are so many old wives tales saying that certain items trigger an audit: home office deductions, passive losses, schedule C (sole proprietorship) activities, etc. But you really can’t predict the trigger (and you can drive yourself crazy trying), but you *can* adopt the “be reasonable” mantra about every item on your return (with our help, of course), including these. So if you don’t have a decent claim for a home office, we’ll help you not to claim it. If your money-losing sole proprietorship is really more a fun hobby, treat it as such.
Look–don’t be scared to take deductions and losses you’re entitled to, but don’t take tax positions you aren’t comfortable defending. If you take reasonable tax positions, you’ll likely find you won’t end up needing to defend them. And if you do face an audit, it will likely be far easier.
2. Make sure it all adds up!
This seems like it should go without saying, but make sure you add, subtract and multiply accurately. Check your numbers through each step and do some simple math checks when you finish. If you do make a math mistake, you are likely to get a math correction notice from the IRS. This isn’t an audit. But our goal is to minimize your interaction with the IRS bureaucracy, which, ah… isn’t known for the best mail handling practices.
3. Don’t miss a 1099
This can be confusing, because the Form 1099 comes in many varieties, including 1099-INT for interest, 1099-DIV for dividends, 1099-G for tax refunds, 1099-R for pensions and 1099-MISC for miscellaneous income. These forms are sent by payers of such funds to both you and the IRS.
So regardless of how many 1099s you receive, make sure they all are accounted for on your return. There are also Forms 1098 which lenders send (to you and the IRS) recording how much interest you paid. The IRS matches your return against the 1098s and 1099s. So one sure way to guarantee an IRS query is to fail to account for something! If a Form 1099 is wrong–say it reports more income than you had–you can explain or deduct it on the return, but you need to first report it.
4. Report “just enough”
I’m not talking about under-reporting income, or holding necessary information back. But you’d be surprised how many professionals and amateurs alike try to submit too much *supporting* information. True, if your return is complex, you may need to add explanations or disclosures in footnotes. Be concise, truthful and accurate, but don’t provide copies of sales agreements, settlement agreements, bank statements, etc., unless you are later asked to by the IRS.
Disclosures can be made on regular paper or special IRS forms. A Form 8275 “Disclosure Statement” on plain paper can be used any time you need to disclose something that can’t be adequately disclosed on the forms. Form 8275-R “Regulation Disclosure Statement,” is for disclosing positions that are contrary to IRS Regulations or other authority. You shouldn’t be filing a Form 8275-R–or taking a tax return position that would require it–without professional help.
Frankly, though, any disclosure statement should be checked with someone who can take you by the hand and ensure it’s done properly (ahem).
5. Don’t fight what you don’t need to fight
Here’s where some clients have gotten in trouble in the past, despite our admonitions: If you take reasonable tax positions, and complete your return accurately, checking your math, why should you pay a bill if the IRS sends you one? Frankly, it’s a matter of practicality (and wisdom) rather than principle. It just doesn’t pay to fight with the IRS on small matters. So don’t get into the bureaucratic system and risk bigger problems for a few dollars. Just pay it and move on.
6. Avoid minor amendments
Here’s the reverse situation of my previous point: amended returns are reviewed much more regularly than initial returns. So if you forgot a deduction or otherwise think you can get a small amount back by amending, think twice before amending your return (i.e.–consult with a pro). Consider whether you might have bigger problems if other matters on your return, unrelated to the amendment, are reviewed. Yes, you can win a battle…and lose a larger one.
7. Don’t ask for cash
Perhaps you’ve received a notice that you are entitled to a refund. Well, you might consider applying it to your next year’s tax payments, rather than asking for the refund in cash. If you have a big refund, you’ll simply have a lower “profile” to the computers and to the bureaucrats if you file a return applying a whopping refund to estimated tax payments for the current or future years. This logic applies to both initial returns and to amended ones.
8. Go with a pro
Yes, this is a bit self-serving–but I’ll also make a “damaging admission” here: some tax professionals argue that a return prepared by a professional is less likely to be audited. However the facts are that there’s little reliable data to support it. That being said, having a professional prepare your return–or at least advise on anything quirky–is simply a wise investment.
So to absolutely ensure that whatever happens, you’ll have someone at your side–give us a call!
And a last word: No matter how careful you are, there’s no way to guarantee you’ll never have a tax controversy. Sometimes your number just comes up. But when your number is called…make sure you aren’t alone.
I hope this helps.
New credit card rules can trap you
March 1, 2010 by Roger Menden
“Old times never come back and I suppose it’s just as well. What comes back is a new morning every day in the year, and that’s better.”
- George Edward Woodberry
Last week, I sent a note re: avoiding an audit, and I’ve heard from quite a few friends and clients who passed it along to *their* friends and family for whom (I hope) it’s especially useful.
THANK YOU!
As you probably have gathered, I write these weekly blogs because I sincerely desire to offer my experience and expertise to the tax & financial issues which too often become rushed in the midst of the tax season crunch. I read every response, and I’m so grateful to be connected to a group of families & individuals who trust us enough to invest their hard-earned money in our assistance.
And, of course, I’m always grateful for your referrals–they’re the lifeblood of our firm. While many tax professionals spend an arm and a leg for expensive advertising or have weird, costumed temps waving from street corners, we’ve found that our BEST advertising is the relationships we maintain with our clients and friends. No, I’m not averse to advertising our services–it’s simply that friends who are referred by our clients turn out to be our best kind of clients.
So, thanks for your continued referrals!
This week, I wanted to give you a “heads up” about the new credit card rules which went into effect last week. You should know about some changes which affect YOU.
Read on, and leave your feedback!
“Real World” Personal Strategy
How To Use New Credit Card Laws To Your Advantage
You may not have heard, but a new credit card law (“The Card ACT”) went into effect last week. The provisions of this new law that will impact most of us are the ones around interest rates, over-limit fees, payment allocation, and monthly statements. Now, if you don’t use credit cards in your family life, this doesn’t apply to you…but most people do, and you should know about what’s now being done by credit card companies in response to this new law.
So, here is a quick summary of what you should know so that you can take full advantage of these pro-consumer changes:
Interest Rates
The new rules will make it harder for credit card companies to raise a customer’s rates across the board. Under the so-called “universal default practice”, a consumer who was late on a payment for one credit card might have seen the interest rate rise on that card and another, unrelated credit card.
But now… interest rate hikes are going away during the first year an account is open and on existing balances. However, banks and card companies will still be able to raise interest rates in *some* cases, such as when you are more than 60 days late paying your bill or an introductory rate expires after six months.
Another important exception: Issuers can raise your rate before the first 12 months is up if your rate is “variable” and tied to an index–and that index rises. These indices are at historic lows, but when rates begin to rise (to keep inflation at bay), so will payments.
Over-Limit Fees Rising
Another major change involves the fee charged when a consumer charges more than his or her credit limit. Until now, many card companies have allowed consumers to continue charging beyond set limits–tacking on sometimes hefty over-the-limit fees in the process. Cardholders will now have to “opt-in” for over-the-limit spending.
How Payments Are Applied To Balances
With the new rules, card issuers have to apply payments to the part of a bill with the higher interest rate. For example, if an account has a $5,000 balance with a regular rate of 15 percent, and a $5,000 balance at a promotional rate of 5 percent, the monthly payment must be applied first to the balance with the 15 percent rate. This is good news for the consumer.
Monthly Statements
Credit card statements will have to show how long it will take to pay off a credit card if only minimum payments are made. The statements will also have to show how a consumer may pay off the entire bill in 36 months if payments are increased.
Lastly, you should be aware that, because of these new rules, credit card issuers will be forced to find other sources of revenue. Already, we’re seeing card companies take an “airlines” approach–identifying ticky-tack fees which can be justified as a “normal” course of business. Rewards transactions & international charging are two very-common places which card issuers are already applying fees. So watch your statements carefully.
And, of course, we’ll be watching YOUR information even more carefully–if you let us!
I hope this helps.
