Could There Be a Mistake? We Can Fix It.
May 2, 2011 by Roger Menden, Shakopee Tax Professional
"If you don’t like the road you’re walking, start paving another one."
- Dolly Parton
As I write this on Monday morning, we’re all pretty distracted by the news of the capture and death of Osama bin Laden. It’s a bipartisan moment of gratification — even if it does mean celebrating the death of another human being. In this case, the world may actually be a better place right now.
All that aside, I wanted you to know that we’re starting to pick the pace up around here, after the intensity of the end of our busy season. This is the time of year when we reach out to non-clients and business owners, who are looking for real assistance in managing their tax burdens and finances.
It is, after all, what we do best.
Yes, shutting those doors at the end of the day two weeks ago (the 18th) was sweet. My staff and I could look back on months of hard work, and take real satisfaction in hard work and a bunch of new client relationships which we’re excited to see last for years.
"But…what now?"
That’s a good question–and it takes me back to our offseason preparation. Sure, we’ve taken some well-deserved rest around here … but we NEVER "shut the door" on our relationship with YOU!
That’s why we’ll continue to be here for you for all of your tax and financial needs. If you’re new to us this year…you’ll soon find out that we make a big deal around here of keeping in touch, and offering you hope and wisdom about the current state of the economy–and YOUR wallet!
So this week’s Strategy Note, in fact, deals with a topic which most taxpayers have no idea about.
Roger Menden’s
"Real World" Personal Strategy
Yes, You Can Still Find Deductions
As a client of mine, you’ve already got the peace-of-mind that you were able to claim every possible deduction legally allowed in the tax code for 2010. We put each return through an extensive review process to ensure to ensure you keep as much of your hard-earned income as the IRS allows.
But what about your friends?
Well, since it’s now AFTER April 18th, they might think that the proverbial "fat lady" has sung on their 2010 returns. Not so.
Did you know that according to a report issued by the General Accounting Office, taxpayers overpay the IRS almost $950 million every year, which equates to an average overpayment of $400 per taxpayer. That’s a somewhat dated report…and the current numbers are certain to be higher.
What’s worse is that folks who prepared their own taxes (with a software, or on their own) are the most vulnerable. But did you also know that taxpayers who used one of the "big chain" preparers are almost as bad off?
An excerpt from a more RECENT report from the GAO: In a Limited Study, Chain Preparers Made Serious Errors
In GAO (United States Government Accountability Office) visits to chain preparers, paid preparers often prepared returns that were incorrect, with tax consequences that were sometimes significant. Some of the most serious problems involved these preparers…
1. Not reporting business income in 10 of 19 cases;
2. Failing to take the most advantageous postsecondary education tax benefit in 3 out of the 9 applicable cases; and
3. Failing to itemize deductions at all or failing to claim all available deductions in 7 out of the 9 applicable cases.
More clippings from the report:
* The 19 paid preparers we visited arrived at the correct refund amount only twice. On 5 returns, all for the plumber, they understated our refund amount by a total of $3,465.
* All 19 of our visits to tax return preparers affiliated with chains showed problems. Nearly all of the returns prepared for us were incorrect to some degree, and several of the preparers gave us very bad tax advice, particularly when it came to reporting non-W-2 business income. Only 2 of 19 tax returns showed the correct refund amount, and in both of those visits the paid preparer made mistakes that did not affect the final refund amount.
So what can your friends do about this? Simple: file an "Amended" Return.
Many tax businesses don’t provide this service, but even though we’ve completed our clients’ returns, we WILL review any of your friends’ returns–at no charge.
To You and Your Family’s Peace of Mind!
Refunds & UN-Automating Your Life
April 25, 2011 by Roger Menden, Shakopee Tax Professional
Success is not measured by what you accomplish but by the opposition you have encountered, and the courage with which you have maintained the struggle against overwhelming odds.
- Orison Swett Marden
Last week, I posted my Note about automating your investment savings. After posting it, I did some more thinking about the whole notion of automating our lives, and I realized that there are some times when "automation", as such, can actually HINDER our financial growth.
Call it the hidden costs of convenience. And, in my opinion, it’s quite real.
But before I get to that, a few tax-related items:
1) Your Refund Status: Make sure you have a copy of your tax return on hand or know your "filing status", SSN and the exact dollar amount of the anticipated refund.
* Online: Go to IRS.gov and click on "Where’s My Refund". (http://www.irs.gov/individuals/article/0,,id=96596,00.html?portlet=4)
* Automated Phone: Call 1-800-829-4477 24 hours a day, 7 days a week for automated refund information.
* In-Person Phone: Call 1-800-829-1954 during the hours shown in your IRS form instructions.
2) "Do I need to keep a copy of my return?"
Yes, for a *minimum* of three years. There’s all kinds of contexts where it’s useful. We do keep one on file, on your behalf, but it’s just smart and safe for you to keep one in a secure place at home. (I’ll soon have a Note about Amended Returns, and you will need a copy for that process, as well.)
As for the supporting documents from your return, anything that relates to a home purchase or sale, stock transactions, retirement, business or rental property, should be kept much longer than the three years.
Now … I have a humble suggestion for you this week, and as always, I’d love your thoughts!
Roger Menden’s
"Real World" Personal Strategy
The Benefits of De-Automating Your Personal Finances
Small business owners know what it is to write checks for quarterly taxes, and, I believe, they have deeper sense for what they are paying, as a result.
In fact, I think our country would be a different place if everyone had to write a personal check and send in their taxes like this. When people really see what they pay (or don’t pay) I think they would feel differently about their tax burden!
This is a common refrain among certain political observers — but it has me thinking about what it might mean for YOUR family…
In fact, this is part of the genius of financial guru Dave Ramsey’s "envelope system" for family budgeting (whereby you place cash into specified envelopes, and pay only as much cash as remains in the envelope for different budget categories). "Automating away" our obligations can lull us into financial slumber.
Which is why I now propose that you REMOVE automation from certain checks that you write each month. (Again, this is aside from automated savings, as discussed last week.)
[But a word of caution: The only danger to this approach is that you run the risk of focusing too much on scrimping pennies. I certainly advocate wise budgeting, but it's important to remember that thinking over much about saving money can constrict your mind away from important "risks", which can often be worth taking -- like starting that business, making a new investment, etc. Don't let this technique keep you from expanding your financial mindset!]
So, a few suggestions for what you might DE-automate:
1) Just once, receive your paycheck in cash (instead of ACH’d), or cash the full amount when you receive it. Because, have you ever HELD one paycheck’s worth of money before? It’s really hard to fully comprehend how much you’re bringing in until you physically feel those stacks of $20s in your hand. I can guarantee you it’s a lot harder to spend it when you’re seeing it in person rather than online. And it hurts frittering it away more, too.
2) Paying your mortgage manually. Feel the burn of this large check, every time you write it. It will trickle into how you think about the other bills which you pay such that even if this is the only bill you take off of "auto-pay", you’ll be wiser with your remaining funds each month.
3) Only purchase vehicles for cash. If you had to pay outright, wouldn’t you end up with a cheaper car? Probably. Just because many are used to setting up loans and payments for vehicles, does NOT mean it’s wise — in fact, this is one of the primary markers for the "quiet millionaires" (those who are getting ahead financially, even on relatively smaller salaries). Yes, your pride might suffer when you’re not rolling around in a 2011 Lexus … but considering the real cost of that pride-booster does wonders for ameliorating your egotistic tendencies.
In short, paying in cash (or with a manual check) helps you to consider the following questions:
* Is this ____ still WORTH it?
* Is there a way I can cut it down a bit?
* What’s the best way to pay for it right now? (c/c, check, cash?)
Again, some of this could literally take seconds, but the point of it all is that you STOP to do it. With automation, you don’t get the "ping" every month because it’s already doing the thinking for you. You’ll learn a LOT more about the financial "you" this way than you would otherwise, I’m certain. It’s really about paying closer attention.
Enjoying the slowdown around our offices, but still thinking of YOU!
A Simple Tweak, Which Can Really Help
April 18, 2011 by Roger Menden, Shakopee Tax Professional
You have to see opportunity before you can seize it.
- Greg Hickman
I think this week’s Note can really help every one of my clients and contacts. I’m excited for you to read it.
But as I write, it’s tax day (Monday, April 18th), and we are pushing hard during this final stretch! Procrastinators are streaming through our doors (after all, we welcome them here), the phone is ringing off the hook, and my email inbox is overflowing.
Another year, another tax day.
So, here’s my confession: I didn’t write the below article this morning. I hope you’ll forgive my lack of timeliness. But I *did* prepare it earlier, because I KNEW that today wouldn’t allow me to. However, I’m a pretty decent planner, so I had this one all set up and ready.
That said… I’m quite proud of this one, and I think you’re going to really enjoy it. It’s admittedly a little on the technical side–but I really believe it’s worth your time to read and consider. Would love your thoughts on it!
Roger Menden’s
"Real World" Personal Strategy
Automatic Investing As The Basis For Real Wealth
Yes, it may be a cliche, but the greatest engine to generate real wealth is saving and investing. And the best way to ensure that your default is saving & investing is to automate the process. Pay yourself first, and your savings will grow exponentially.
Effective money management is based on the idea that very small changes can yield enormous gains in your family’s finances. This process, both easy and simple, is worth millions. Unfortunately, only a tiny percentage of American families take advantage of the tools available to implement this automated technique.
So here’s how you pull this off: Have all income flow into a joint taxable investment account. Make saving and investing your default. Putting all of your money in this account helps ensure that you move only the money intended for some other purpose into a different account.
For working families, this means an automatic deposit of paychecks into their joint account. Banks will try to entice you into setting up automatic payroll deposit into their checking account. They will offer you additional interest if you do so. Resist. The additional interest is not worth the failure to not only save but to save and invest. Your taxable investment account should be the default.
For retired families, this means an automatic deposit of Social Security checks. It also means their required minimum distributions (RMDs) from their individual retirement accounts (IRAs) should be deposited first into this account.
From this account you can then withdraw what you need for daily expenses. Do this by setting up a regular transfer of funds from your joint investment account to your checking account. Make sure the transfer matches the amount you have allocated in your budget, ideally 65% or less of what you need to support your lifestyle. The other 35% should remain in your joint taxable account, much of it to be invested.
Part of what remains is the 10% you have designated for "unknown unknowns". In the ideal world, this money will not be needed, but few families can anticipate every possible expense. Each stage of life presents new challenges. Having the financial margin to absorb some of life’s shocks is simple wisdom and offers financial peace of mind.
Because the time horizon for this emergency money is unknown, invest it in a balanced portfolio. If unused, your emergency money will double in 7 to 10 years and provide a greater safety net for your family. If you have to dip into this fund, keep track of the amount. If it approaches the full 10% every year, you are using your emergency money to extend your budget, not simply for unanticipated expenses.
The less you use this account, the more quickly you will reach financial independence. These funds are mixed with your other taxable investment savings and continue to grow your net worth. If you are meeting all of your expenses without any major surprises, these funds can be used to purchase a home, start a business or for additional charitable giving.
Another portion of what remains in your taxable investment account will be the 5% you are specifically designating as taxable savings. Because this 5% gets mixed in with charitable giving that is being invested and your unknown expenses, the entire portfolio should be balanced. If an emergency arises, any portion of the portfolio could be sold to furnish the needed funds. Similarly, when you want to gift appreciated stock, any portion of the portfolio could be gifted.
The last portion might be the 10% for funding your retirement accounts each year. Many people put this money directly into a retirement account as part of the payroll process through a pretax deduction. If that is the situation, you don’t need to flow anything through your taxable investment account. But you may want or need to fund your retirement outside of a payroll deduction. One example is funding your Roth IRA each year. In this case you may want to collect the money in your taxable investment account and then transfer it to a Roth account.
If you want to fund a Roth IRA account for the maximum $5,000 (in TY2011), you could transfer the entire amount once during the year or set up a monthly transfer of $416.66. The money from your paycheck would provide the cash, either letting it build up throughout the year or supply the funds for each month’s transfer.
Busy people forget to make the necessary transfers each year. That’s why a monthly transfer is preferable. Saving and investing should be automated so it occurs regularly without any additional effort. Whatever is in your checking account you are likely to spend. Whatever is in your investments you are less likely to spend.
Automating the process of saving and investing is like damming a river to form a reservoir. The alternative is the manual process of hauling buckets of water from your stream to a water tower. You will never grow rich by hauling buckets, and it’s much harder work.
No matter what income you have, you probably already have enough to grow rich! Saving and investing just $10 a day builds a million dollars over your working career at average market returns. You build wealth by what you save and invest, not by what you spend. Automating the process of saving and investing grows your wealth while you sleep.
Sending you our affection, through a haze of tax forms!
Thoughts During Our Final Week
April 11, 2011 by Roger Menden, Shakopee Tax Professional
The ability to concentrate and to use your time well is everything if you want to succeed in business–or almost anywhere else for that matter.
- Lee Iacocca
I’m writing this on Monday morning, the 11th, and our offices are buzzing!
Next Monday will be no different — it’s the federal deadline, after all, and we always get panicked phone calls from people on that day. There is still time for us to do an excellent job for you or for your friends, as of this writing, but the window is closing rapidly.
So, I have a solution for you in this week’s Post … but before I get to that, a couple quick points:
1) The averted government shutdown means that refunds will NOT be delayed — more than normal, that is. If you’re curious about the status of yours, go here:
http://www.irs.gov/individuals/article/0,,id=96596,00.html
2) Tomorrow (Tuesday) is "Tax Freedom Day", which is calculated each year by the non-partisan Tax Foundation (if the government *had* shut down, it would be even later!). Here’s that information, if you’re interested: http://www.taxfoundation.org/taxfreedomday/. One of the fun little facts:
Americans will pay more in taxes in 2011 than they will spend on groceries, clothing and shelter combined.
Which, of course, is why I and my staff are here: keeping your tax bill as low as legally and ethically possible.
And, of course, we can always do this …
Roger Menden’s
"Real World" Personal Strategy
Extensions, Explained
Let’s clear some things up with some facts about getting an "extension".
As you know, this upcoming Monday, April 18, 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) this form…
http://www.irs.gov/pub/irs-pdf/f4868.pdf
…with the IRS by the end of the day on the 18th. This gives you an automatic six-month (until October 17, 2011) extension of time to file.
Here’s the deal: An "Extension of Time to File" is not an "Extension of Time to Pay", unfortunately. 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!
So, 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 other 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 18th), or you can call a specialized provider and pay by credit card. We can provide you with the appropriate number to call.
To You and Your Family’s Peace of Mind!
I’ll Get To It Sometime
April 4, 2011 by Roger Menden, Shakopee Tax Professional
The future depends on what we do in the present.
- Mahatma Gandhi
No, I’m not talking about your tax return! (Certain clients who’ve met with us in the past few weeks may have had a stab of panic over that subject line.)
But come on — haven’t we all uttered that magical phrase, capable of assuaging all our fears, and brilliantly putting off tomorrow what could have been put off today?
I’m talking to you, Mr. [or Mrs.] Procrastinator.
Yet do not fear! I’m not here to browbeat, I’m not here to scold … instead, I’m here to offer hope.
And, for those of you who have NOT procrastinated, I’m here to offer you the chance to help your friends by having them come see us ASAP! Even at this late hour, we gladly receive friends of our existing clients — we make a special point to accommodate clients’ friends, because we’ve discovered that our great clients have very good taste in friends!
And, a few words for the possibly-panicked procrastinators in our midst this week…
Roger Menden’s
"Real World" Personal Strategy
Good Procrastination
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:
(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 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.
To You and Your Family In This Tax Season!
Kindergartners With A Credit Card?
March 28, 2011 by Roger Menden, Shakopee Tax Professional
"Good, better, best. Never rest until good be better and better best."
- Mother Goose
Google tells me that Mother Goose didn’t *actually* exist — but she sure was smart, eh?
We’re heading into spring … and just a couple weeks remain here in "tax season" (what we tax professionals call it). I do hope that, by now, you’ve taken the steps to be in touch with my office, and that we’re already working on your file.
Next week, I’ll have some advice for "procrastinators" (you know who you are!), but needless to say — let’s not have you be in their ranks, ok?
In my Strategy Note this week, I’d like to address moms and dads. We’ve seen many parents in our offices these last few months, and I’ve asked a few of them how they handle finances with their young children. Well, many parents have no plan for training their children how to understand, and handle finances.
I’d like to help you fix that. We’ve put together some strategic advice to help you raise financially-literate children, in hopes that by the time they reach adulthood, they’ll be contributing to your family economy — rather than draining it!
Let me know what you think …
[And again--drop us a line to get in our queue ... and send your friends our way! We reward generously for referrals because they always end up being our best clients.]
Roger Menden’s
"Real World" Personal Strategy
Money Lessons For Young Children
Perhaps I’m biased, but I believe that it really is never too early to start teaching your children about good money habits. Obviously, by doing so, you are preparing them for the uncertain future. You’re also establishing a family culture, wherein money is handled with maturity and openness.
But the best news is that helping them to develop these habits can be fairly simple! I’ve put together some basic steps — many of these may not seem like rocket science, but my job is to be a coach and a goad for you to do the things which you already may "know" to do!
1) Give them an allowance–with strings. Don’t just give them an allowance for doing nothing — this actually defeats the purpose! You can buy your young children whatever they ask for, so they don’t need "spending money". Instead, see an allowance as a training tool: your children should learn that money is earned by working. Believe it or not, this isn’t an obvious connection for a young child! Because a kindergartner truly is able to help with small chores around the house, you can put them to work and let them earn their allowance this way. Rather than seeing it as a "bribe", or some sort of indentured servitude, this is a critical knowledge base for a young child.
2) The old lemonade stand. Encourage this! And do it with adult supervision. Your child will learn how to make a product, market it and sell it. While the idea is to teach good money habits, they are also learning valuable life lessons — nothing sells itself, after all. (Though with cute kids, that’s sometimes the case!)
3) Saving and investing. Rather than showering your young child with gift after gift, encourage them to go through the process of working towards a savings goal. You can always "supplement" this process, but having your child save up for an item will teach them that nothing comes for free. In return, children also learn that the items you buy them have real value and should be treated as such.
This might, even, cut down on those "negotiations" so familiar to parents who bring their children into stores!
4) Cold, hard cash. A lot of children nowadays are so used to seeing parents pay with debit and credit cards that they may not know what actual money looks like! This is a new-generational issue, and it’s important that your children learn that money is more than a mouse click, or a card swipe. Show your kids the different types of money – coins, bills, etc. and tell them the monetary amount for each.
When you go shopping, let your child have a try at paying for certain items. This will help them feel quite grown up, and again — they see that transactions don’t just "happen", they cost.
What about you? How have you gone about introducing your children to money? I’d be interested to hear some other tactics, and may share them with the list next week.
But until then, I remain your kindly tax professional — out to save the world from unnecessary taxes … and from young adults still living on Mommy/Daddy credit!
To You and Your Family!
Posting This Again
March 21, 2011 by Roger Menden, Shakopee Tax Professional
“I’d rather regret the things I’ve done than regret the things I haven’t done.”
- Lucille Ball
Well, last week I departed from my normal area of expertise, and wrote a real-world guide on preparing your family and home for a true disaster. Got lots of feedback — thank you!
But, I thought I should re-enter the fray of my primary task: ensuring you and your family don’t face an IRS disaster! And, since we’re nearing the home stretch in tax season, with the deadline for individuals (April 18th) just under a month out, we’ve been “packing them in” around here!
But this is something we still get asked about every day!
However, before I get there, I did want to say that 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 our clients–and for your trust in us during these “unusual” times.
We’re getting notes around here more and more often as people pass around my Strategy Notes to their friends. People seem to hunger for real world hope. I’m glad to be able to say that there *is* reason for anticipating a recovery in our future, but that whatever comes, my staff and I will be here to walk you through the storms.
So, onward with the answer to our most commonly-asked question around now!
Roger Menden’s
“Real World” Personal Strategy
Your Tax-Time Checklist!
In early January, I wrote a “checklist”, and it was one of our most popular messages. 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 the 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 18th, 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 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!
The Japan Disaster And You
March 14, 2011 by Roger Menden, Shakopee Tax Professional
He who loses wealth loses much; he who loses a friend loses more; but he that loses his courage loses all.
- Miguel De Cervantes
It’s deja vu all over again, with another massive earthquake coming during tax time this year. Last year, it was Haiti … this year, of course, it’s Japan.
The fallout (if you’ll forgive that term, not intended as an insensitive pun) has been radically different for each event — but, as was the case with the Haitian earthquake, the real problems and ramifications for everyone are yet to be seen … but what *is* clear is that many lives have been lost, and many more have been radically altered.
So, how have you been processing this one?
Last year, I was struck by how different my daily existence was, from the devastation wrought in Haiti. The same is true here … but I must confess to feeling (at least at first) some "disaster fatigue" setting in.
It seems that the world has spawned disaster after disaster over the last year.
But that doesn’t mean we turn away. No, this is the time where we actually need to "press in" a little, and care.
(So, as an aside, I’d also be interested to find out if you have located an effective place to send donations–the big organizations spend so much money on "overhead", that (as I mentioned about this time last year, for Haiti) I find it difficult to believe I’d get the most "bang for my buck" in donating to them (as we unfortunately saw with Hurricane Katrina). Any thoughts?)
So, rather than my normal tax or financial fare this week, I have something different. I’ve stopped apologizing for being such an obsessive planner … it sort of pays to be that way, in my profession, after all! This week, I wanted to remind you of what we almost never think about during "good" times: How to prepare your family for "grid-failure" emergencies.
This isn’t an area of extensive expertise for me, but it’s so important, I did some research, and have a good framework for you to consider… (after the jump)
Roger Menden’s
"Real World" Personal Strategy
How To Prepare Now For a "Japan-Type" Disaster
With the images of devastation we’ve been seeing, in addition to being moved for those who are currently experiencing all this, I’ve been reminded how important having a plan really is.
This is true for finances (a tax plan, an estate plan, etc. – let us know if you need to set one of those up! 952-445-8753), and it’s equally true for a big disaster.
We can be so complacent about the security of our daily existence, that an event like this seems unrealistic. But, we’re getting continued reminders, every year, at how fragile our modern world truly can be.
But that doesn’t mean you have to panic.
No, with a few basic points of preparation, you and your family could be vastly more prepared than your neighbors, even giving you the opportunity to be ones who can support and assist your neighbors, rather than have to *ask* for support.
There are three primary areas where you need to be prepared:
1) Energy/Power/Heat
2) Water & Food
3) Family
1) Energy: However unlikely a massive grid failure might seem now, it’s important that you at least think through what you and your family would do about heating your home during the winter (wood stove? indoor propane heater? burning your furniture?), and/or cooling your home during the summer (which may not be quite as critical).
Additionally, consider what parts of your existence are dependent on power, and what it would be like to live without it. Write down your plan.
2) Food & Water: For water and food, it’s a very good idea to have food and water for at least 3 days on hand, and in permanent storage. Typically, you need about a gallon of water, per person, per day … and non-perishable food is now so readily-available, that you have your pick for how to stock up. You can save water in a leech-proof plastic jug and just switch it out every 5 years.
3) Family Plan:
* Identify meeting places where you and your family would come together, in the event of some sort of catastrophic grid failure or event, in which you aren’t able to stay at home.
* Put together a "Go Bag" for your family, which carries critical supplies and information for whatever circumstance you may run across. Here is what your bag should include …
• A disaster plan including location of emergency centers, rallying points, possible evacuation routes, etc.
• Positive Identification, such as drivers license, state I.D. card, or social security card
• Enough medicine to last an extended evacuation period
• Cash and change, as electronic banking transactions may not be available during the initial period following an emergency or evacuation
• A first aid kit
• Fire starting tool (e.g., matches, ferrocerium rod, lighter, etc.)
• Professional emergency literature explaining what to do in various types of disaster, studied and understood before the actual disaster but kept for reference
• Maps and travel information
• Standard camping equipment, including sanitation supplies
• Weather-appropriate clothing (e.g., poncho, headwear, gloves, etc.)
• Bedding items such as sleeping bags and blankets
• Medical records
• Pet, child, and elderly care needs
• Battery- or crank-operated Radio
• Lighting (battery- or crank-operated flashlight, glow sticks)
• Firearms and appropriate ammunition
• Fixed-blade and folding knife
• Duct Tape and rope/para-cord
• Plastic tarps for shelter and water collection
• Slingshot, pellet gun, blowgun or other small game hunting equipment
• Wire for binding and animal traps
This all might seem a bit excessive now … but so does every disaster plan — until disaster actually strikes.
So, perhaps make it a fun family activity to work through setting up these plans, and you’ll sleep much better knowing you’re prepared!
To you and your family’s safety!
Are You Working Without A Net?
March 7, 2011 by Roger Menden, Shakopee Tax Professional
“Then give to the world the best you have, and the best will come back to you.”
- Madeline Bridges
Before I get to what I wrote this week, I wanted you to know that there are a few important “announcements”, following my Note, which affect your tax situation for 2010 (i.e. the taxes we’re helping you prepare NOW), or for this year.
I’m always fascinated by the “behind the scenes” of what happens in different businesses. For instance, I wonder what the board meetings are really like for professional sports teams, for tv stations. Some people think about the teams, the shows … I find myself thinking a lot about the business behind them. That’s just how I’m wired.
Well, one of the “behind the scenes” aspects of OUR work is our interaction with other tax professionals. We go to conferences (put on by the IRS, etc.), we share strategy with one another (unless we’re in fierce local competition — but even then, I make it a point to be giving), and we often get to see each other’s work (reviewing returns).
But one of the problems with many tax professionals are the “terms” by which they operate, and a lack of communication about what happens when … well, read on.
Roger Menden’s
“Real World” Personal Strategy
When The Tax Return is Wrong
Do you have a tax accountant who guarantees their work…in writing?
Sure, some guys might say: “We’ll make it right if we screw up”, but then the stuff hits the fan and they fight you every step of the way.
I’ve heard too many horror stories about taxpayers getting a letter from the IRS, then they take it to their accountant, and then the letter sits on a desk gathering dust.
Or stories about the CPA who makes some calls on your behalf, but then you get charged an arm and a leg in the process. Or sadly, a taxpayer doesn’t get any help from the person who prepared their taxes for them so they “go it alone”, call the IRS themselves and have to try to figure out what to do and not to do during this normally ugly IRS correspondence … THIS can be a nightmare!
Don’t let that happen to you. You need to have a written understanding with your tax professional that you won’t be left in the lurch. Oh, and also-does this guarantee actually do something you want it to?
I’ve seen some accountants guarantee they will file your taxes for you by April 15th or they will file an extension for you. Well…great! That sure makes you feel good in the morning, doesn’t it? Other weak guarantees I’ve seen in the tax industry are, “We guarantee we will begin preparing your tax return the same day we meet with you.”
That means nothing to me. I don’t care when you start preparing my taxes. I want to know how long it is going to take you to finish it and do so without leaving out silly errors you know you should have caught.
So remember: the guarantees should be in areas you care about, like:
Tax Return Accuracy … Speed of Service … Most Money Legally Yours … Ongoing IRS Protection For Years After Filing …
These are the things YOU care about! Make sure the tax professional you choose stands behind these critical areas of tax filing so you get the most out of your tax filing experience.
Now for those announcements:
1) There are (literally) BILLIONS of dollars in unclaimed refund money available from the IRS from 2007 returns. Here’s the catch: You must claim it by April 18th, 2011. How do you do that? Have us take a look at your return, and file an amendment if we find something which needs changing, updating, etc. There are all kinds of reasons why this might be — suffice to say that nothing ventured, nothing gained.
Or, alternatively, there are people who simply didn’t FILE a return, but just trusted that the taxes withheld from paychecks was correct. Oops — that’s where the IRS gets the billions figure, because there are unclaimed refunds due to unfiled returns.
Either way, we can help (and routinely do). Call us: 952-445-8753
2) About that deadline: We have three extra days to work on your information this year, but this does NOT mean that you should procrastinate!
The three extra days have been added because of Emancipation Day, which is a little-known Washington, DC holiday that celebrates the freeing of slaves in the district. The holiday actually falls on Saturday, April 16 this year, but will officially be observed on Friday, April 15. As a result, the IRS pushed the filing deadline to Monday, April 18 – since the tax code states that filing deadlines can’t fall on Saturdays, Sundays or holidays.
Despite this short extension, the federal filing deadline is approaching quickly. Don’t wait until the last minute to get your paper work in order.
With gratitude for your trust!
When The Stuff Hits The Fan
February 28, 2011 by Roger Menden, Shakopee Tax Professional
“Riches do not consist in the possession of treasures, but in the use made of them.”
- Napoleon Bonaparte
Egypt. Libya. Bahrain. The Mideast is boiling right now.
Mass protests in Madison, WI. Fear of inflation. Fear of deflation. Rising public debt. Worst of all for some: the NFL season for 2011 is in jeopardy!
I don’t mean to make light of all this turmoil by that last example. But what I do want to point out is that fear has become a regular part of the national diet. It truly is frightening many people into all kinds of “worst case scenarios.”
One of the simple tonics for your fear is to take actual action against it. For many, this is a mindset issue: the “diet” for your brain may require some adjustment, i.e. what are you allowing to pollute your thoughts these days?
But an even better action step is to take steps of preparation, so that you are ready for whatever comes. So, in response to some conversations I’ve had with clients during the course of this (very) busy tax season, I thought I’d take a time out to lay out for you six basic steps for financial preparedness in this week’s Note.
Roger Menden’s
“Real World” Personal Strategy
How To Prepare Your Finances For Emergencies
It’s my firm belief that how you choose to think about your circumstances has a subtle, yet profound, impact on how you handle storms. I’ve written often on this subject, so I won’t belabor it here.
Instead, this week, I thought I’d give you a short run-down on specific, financial steps to put in place so you can be ready for whatever kind of situation you might find yourself in.
1) Put $1,000 aside. It doesn’t amount to a real emergency fund, but it will do until you get your finances in order. You can accumulate the $1,000 by allocating $10 a day for just over three months. Most people go into debt because they live hand to mouth, spending 100% of their take-home pay. Then life happens. Having a mini-emergency fund can help you get out of debt and stay out of debt.
2) Remove yourself from credit card debt–forever. I suggest paying off your credit card by starting with the smallest balance in order to achieve small successes and then working to snowball your payments as you tackle the larger balances. These first two steps, having $1,000 and paying off debt, simply prevent you from facing a financial emergency by starting out wounded and bleeding.
3) Improve your ability to handle fluctuating monthly expenses. If you can, set up a monthly budget so your day-to-day expenses are less than 65% of your take-home pay. The difference between those growing rich and those remaining poor is not the salary they make. It is the salary they keep. Relative to their income, the rich are frugal. They save and invest. They spend less than 65% of their take-home pay on day-to-day expenses. They save at least 10% in their retirement accounts and another 5% in taxable savings. They direct another 10% toward unknown big purchases. And they even live frugally enough to give another generous 10% to charities.
4) Automate your cash flow to promote saving and investing. Every month, have 10% transferred into your retirement account before you receive your paycheck. Then automate the transfer of 25% of your take-home pay into an investment account a day or two after your paycheck is deposited. Automating your savings makes savings a high priority and ensures that you pay yourself first. This investment account will grow over time, and you can use it to pay for big emergencies and charitable gifts.
5) Set up an asset allocation for your investments that’s diversified for safety while being invested for growth. If you make it to this step, you’re well ahead of the game…but the game ain’t over yet! Diversification works, and it’s never more obvious than in times of market turmoil. Without diversification, portfolios can have a zero return over a decade. After being well diversified, the likelihood of no return over a decade drops significantly.
6) (If necessary) Mobilizing during an actual emergency. Having the discipline to budget for small financial emergencies will help you be prepared when you encounter larger financial crises. When some unknown spending need strikes, take the money to cover the expense from your growing emergency fund. Then, determine if you have been budgeting for this level of unknown expenses adequately.
Usually emergencies don’t happen. So the money you have socked away makes more money. Keep an emergency fund for several years and it should double in value, giving you an additional emergency fund. Whether you need it or not, being prepared for a financial emergency means peace of mind, knowing that your lifestyle is frugal, so you won’t be in trouble.
With gratitude for your trust!
