The Yearly Journey of 1,000 Steps: It’s Tax Season and I Can Do Better

journeyAh, mid-February- that time of year when my postman provides a daily barrage of tax documents, and scolds me for not retrieving them quickly enough. When it finally becomes apparent that he can no longer jam another rumpled envelope into my overflowing mail slot I know it’s time to file my taxes. While this annual ritual often yields a financial reward in the form of a tax refund, there is clearly a higher purpose for the enormous pile of paper. Note to self: my inner guilt will be quelled; this year I will make better use of tax time, and so can you. Continue reading


Which type of IRA is right for you?

roth_or_traditional_iraAsk a financial planner whether to save for retirement using a Traditional IRA or a Roth IRA and you may receive an unsatisfying answer: it depends. While the Roth IRA is a much-loved planning tool, whether it’s the best option for you will depend on several factors, but math is not one of them. Continue reading

11 Reasons Why Year-End Tax Planning Matters

15to16.jpgAs the end of the year draws to a close, it is a great time to consider some planning strategies that can help lower your tax bill. While good tax planning may help save you money, it can also you achieve a variety of other financial goals.

Here are a just a few benefits that year-end tax planning may provide: Continue reading

How To Rescue Your Retirement Plan From A Shortfall


Americans are facing a retirement crisis. And they know it. The story is not a new one, but as larger numbers of the baby-boom generation approach retirement age the extent of the problem is becoming more clear. The 2014 Employee Benefit Research Institute’s Retirement Confidence Survey reports that a mere 13% of workers feel very confident that they have enough money saved for a comfortable retirement. What’s more, these respondents came almost exclusively from higher income households- defined as having an annual income of $75,000 or more. Moving further down the income scale, the results are far worse- 36% of survey respondents with earning under $35,000 per year reported having less than $1,000 saved. Social Security, which makes up the sole source of income for approximately 1 in 5 retirees, and more than 50% of income for 2 in 3 retirees, will become an increasingly important component in the retirement plan of many Americans.

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What Can Marathon Training Teach Us About Surviving Tax Season & Retirement Planning? A Lot!


Anyone that has run a marathon knows that it can be a long and punishing journey to the finish line, filled with a slew of physical and mental obstacles along the way. Yet, despite the challenges, or for many of us because of them, participants line up year after year to collect another finisher’s medal.

Sound a little like working as a tax accountant during tax season, or, for that matter, planning for retirement? Well, aside from the finisher’s medal, blood blisters and aching quadriceps. To be successful, all three require endurance, a little luck and the execution of a thoughtful strategy.

Continue reading

Financial Planning with Children: Your Child’s First Summer Job

Whether it was selling lemonade on the sidewalk, baby-sitting for neighbors’ children, or a high-profile internship during college, we all remember our first summer job.


Summer jobs (or paid internships) are great opportunities to teach your children about money – everything from budgeting to saving.  Here’s a quick reference guide of topics when it comes to your child’s first summer job.


–       Withholding: Help your child sort through the paperwork that is involved with obtaining a job, including filling out the W4 form, which is the form used to determine the number of tax exemptions one should claim.  Importantly, if your child is a student, he/she can claim exempt from tax withholding. 

–       Your own exemption: If you want to avoid having your child file an income tax return, if his/her only income is the summer salary/wages, your child can claim exempt on the W4 and avoid filing an income tax return because he/she is earning under the threshold.  Please note, your child can only be exempt from federal and state withholding, not from social security and Medicare.

–       Claiming dependents: you can still claim your child as a dependent as long as he/she is either a) under the age of 19 at the end of the year OR b) under the age of 24 at the end of the year and a full-time student.

–       Once your child has received his/her first paycheck, it is a great time to start discussing money management, beginning with opening a bank account (checking, savings, or money market).   Receiving an ATM card can prompt an important conversation about the importance of budgeting (and how much of his/her expenses he/she is responsible for paying over the summer)

–       If your child is opening a savings account, it is a great opportunity for him/her to begin putting money away in an IRA (either a traditional or a Roth)

–       Also, make sure to check out our post on: Funding College and Graduate School Using Qualified Education Savings Programs


Last Minute Tax Tip: How Entrepreneurs can get BIG Tax Breaks through Retirement Savings

With Tax Day in 2 weeks, you might be wondering whether there are any last minute things you can do to save on taxes from latax-dayst year’s income.  Good news: if you’re an entrepreneur, there is!

Did you know that if you’re self-employed or a small business owner there is a special type of pension plan available for you (and your employees)?  Available for businesses of any size, a simplified employee pension plan (SEP-IRA)is a written arrangement that allows a self-employed individual or a business owner to contribute to a pension plan with significantly higher limits than a traditional IRA.

A self-employed individual can contribute (pre-tax!) between 0-25% of their compensation (maximum contributions up to $51,000 for 2013, $52,000 for 2014); here’s the small catch: each eligible employee has to get the same percentage.

There are distinct advantages to setting up a plan like this:

  1.      You can contribute more (up to $51,000) to a plan like this than the traditional IRA maximum annual contribution of $5,500
  2.      The contribution is tax deductible
  3.      The account grows tax deferred until you withdraw the money
  4.      There are no annual reporting requirements for SEPs as long as each participant or individual who is in the plan receives a copy of the plan agreement and disclosure form (this is unlike a traditional 401K, defined contribution plan, or defined benefit plan, which have an annual 5500 form filing requirement)

In order to deduct the contribution, you must establish the plan by April 15th and contribute to the plan by April 15th (or the due date of your return including extensions – check with your accountant).

There are very few drawbacks to setting one of these plans up.

How to set up a SEP-IRA:

SEP-IRAss can be set up through a financial advisor, through a brokerage house, or through a bank.

Participants are eligible to sign up for a wide variety of investment opportunities including mutual funds, stocks, bonds, ETFs, and many more.

There should be no establishment fees to launch the plan and annual fees are minimal.

This great way anyone who is self-employed who has a profit to shelter some of that income from taxation.   We recommend using this worksheet to figure out your savings or, as always, contact us.

Secrets to Claiming a Home Office Tax Deduction

Over 25 Million Americans work from home, but only 3.4 Million claim the home office Home-Office-Workspace-Furniture-White-Simplededuction.  Whether you’re a homeowner or a home-renter, if you work at home or use your home for business at all, you may be eligible to claim a home-office deduction this tax season.

There are some new home-office deduction rules that apply. But before we dive into those, let’s go over the requirements for claiming the tax deduction.

If you use your home for business, in order to claim a home-office deduction, the home–office:

1. Has to be used regularly and exclusively for business

2. Has to be your principal place for business

What do these two requirements mean?

1. Has to be used regularly and exclusively for business. You must use the area on a regular basis as your place for doing business and the area must be used exclusively for that business.  It doesn’t need to be an entire room, but it does need to be an area that has clear boundaries (for example, the desk set-up in the corner of a room).  Merely working at your kitchen table filing paperwork because you couldn’t get all your work finished in the office does not qualify.

2. Has to be your principal place for business.  The rule of thumb here is that no substantial portion of your business is carried out in another fixed location (i.e. office).  If you’re having face-to-face meetings at home or use it for the administrative portion of your business, even if you carry out business elsewhere, you can still qualify for the deduction for that room that is regularly and exclusively for business (for example with a carpenter or an interior designer who spends most of their time in other people’s homes).

  • If you have a separate, freestanding building – a studio, barn, garage behind your house, that too, can qualify.
  • For Freelancers:  You may have a full-time job at an office, but freelance on the side (writer, blogger, entrepreneur).  Good news: you can still qualify for their business as long as it is regularly and exclusively for business and used as your principal place of that business.
  • If you are an employee and you use part of your home for business, you also may qualify for a deduction, but, in addition to the two tests above, you also have to prove that: 1) it is for the convenience of the employer (there are no hard and fast rules for that) and 2) you must not rent any part of your home to the employer and use the rented portion to perform services as an employee for that employer

There are 2 methods for calculating the home-office deduction.

1. Simplified method.  Effective, January 1, 2013, this is a new simplified option (outlined methodology in detail in IRS Revenue procedure 2013-13) which significantly reduces the record keeping burden by allowing you to multiply a proscribed rate by a percentage of square footage used by the home-office.  The proscribed rate is $5 per square foot for a maximum of 300 square feet or $1500 dollar of tax savings.

2. Regular method. This method has been around for many years, whereby you must determine the actual expenses for your home office.  The expenses that can be allocated towards home office use can include things such as insurance, light, heat, power, repairs, depreciation, real estate taxes, and mortgage interest.

We suggesting calculating both ways to see which method will result in a bigger deduction.

For more information, call us.

7 Red Flags that May Trigger a Tax Audit

Tax Audit.  Just saying the words is enough to make most people cringe.  With the April Red Flag15th tax-filing deadline rapidly approaching, we’re going to discuss the red flags that could trigger a tax audit.

Sometimes audits are chosen as part of a random sample.  The rest of the time, there are a number of things you can avoid doing so as not to raise red flags.  In order to avoid the likelihood of a government audit, follow these guidelines:

  1. Report all of your income.  Make sure to file any 1099s received (from brokerage houses, miscellaneous income).  The government conducts a matching audit from the payers with what you report: discrepancies are a red flag that will trigger an audit.
  2. A major red flag is if your business (owned) has had a loss for more than 2 out of 5 years.  A business must satisfy rule of profitability (3 of 5 years) to avoid being considered a hobby (in which your profit motives are called into question).
  3. Avoid situations where someone might call the IRS.  For example, situations may arise with disgruntled former employees (i.e. recently fired) or spouses (i.e. in the middle of a divorce) acting as whistleblowers.
  4. Do not exaggerate your expenses.  Claiming too much for deductions (medical, charity, miscellaneous) and not having substantiation for those types of expenses can be a major red flag for the IRS.
  5. Additionally, if your deductions are much higher than average for your income level in your geographic area, a deviation from the mean could trigger an IRS examination.
  6. If you’re in a cash-basis business, it is crucial to be especially careful in properly reporting your income and expenses.
  7. Avoid consistently filing returns late or paying your taxes late.  This is one of the most sure-fire ways to trigger an examination.

Ultimately it is your responsibility to make sure that your return is filed accurately and correctly (even if a CPA files for you).  Make sure never to ignore any sort of letter from the government (and if you do get correspondence from the government, make sure to follow proper procedure as to how to respond).  If you need an extension of time, you can ask for it.  You may want to consider hiring a CPA for handling any audits/examinations.

As you’re preparing your returns for this year, check this list of red flags and make sure to set yourself up for success in avoiding a tax audit.

If you have any questions, contact us.