The Proper Place for Social Security

Posted by on Mar 17, 2014 in Featured, General | 0 comments


“When I look back on all these worries, I remember the story of the old man who said on his deathbed that he had had a lot of trouble in his life, most of which had never happened.” -Winston Churchill

Imagine a man named Bill Fredericks, born in 1948, who is celebrating his 66th birthday today by filing to collect Social Security at full retirement age. Bill’s final salary was $50,000 per year, although when he started working in 1968 he was only earning $7,304 annually.




For the past 46 years Bill has had Social Security withheld from his paycheck. When he first started, the total Social Security withholding was only 7.6%, which for Bill was $46.26 of his $609 monthly paycheck. On his last pay stub, the government took 12.4%, or $516.67 of his $4,167 monthly salary.

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Self-Protection Through Knowing How Long To Keep Tax Records

Posted by on Feb 10, 2014 in Featured, General | 0 comments


“Problems are only opportunities in work clothes.” – Henry J Kaiser

First, retain a paper copy or receipt of any tax-relevant transaction. Scan these documents and archive them electronically, or acquire them in an electronic format. If the purchase has a manual or warranty, store all the documents in the same electronic and physical location.

Seal of the United States Internal Revenue Ser...

Seal of the United States Internal Revenue Service. The design is the same as the Treasury seal with an IRS inscription. (Photo credit: Wikipedia)



Sadly, the IRS has ruled bank or credit card records to be insufficient documentation. As a result, just keep your statements long enough to reconcile your account.

If the purchase was a business or tax-deductible expense, record the expense and why it justifies the deduction. Store this information with or on the receipts.

Second, keep brokerage statements indefinitely for taxable accounts. You are responsible for reporting the cost basis of any security you sell to calculate the capital gains tax. For a mutual fund with 30 years of reinvested dividends, each dividend payment is part of the cost basis. As a result, the cost basis can sometimes be computed only if you have the complete transaction history.

Without knowing the cost basis, the IRS could argue that the entire value of the investment be treated as gain.

If you have lost the record of how much you originally paid for an investment, instead of selling and paying 15% or more of the value in taxes, you can use that investment as part of your charitable giving. Gifting appreciated stock avoids the tax owed and still qualifies for a full deduction. Oddly enough, the IRS still asks for the original purchase date and price for gifted securities, but leaving these blank has no effect on your tax owed.

Many custodians keep several years of electronic copies of brokerage statements available. And they are now required to send any known cost basis electronically when you transfer securities to a new custodian. If your current custodian has the correct cost basis of your securities, you probably no longer need to keep brokerage statements. However, an approach of “better safe than sorry” is always advisable with the IRS.

Third, keep IRA nondeductible contribution records forever. You may need those records every year that you withdraw money in retirement to show that a portion of the withdrawal is not tax deductible.

Or to avoid the hassle, clear out nondeductible IRA contributions by converting all of your IRA accounts to Roth accounts.

Fourth, keep partnership documents, contracts, commission or royalty structures forever. This includes property records, deeds and titles, especially those relating to intellectual property. It also includes any transfers of value for estate planning purposes.

Finally, save all of your tax returns. After you file, save the paper and/or electronic copies with the rest of that year’s financial documents.

Tax returns and all the supporting documentation must be kept at least seven years. The IRS can audit your return for up to three years from your filing date. However, the three-year limit only applies to good-faith errors.

If the IRS suspects you underreported your gross income by 25% or more, they have up to six years to challenge your return. And because you may file for an extension at the October 15 deadline, you must keep your records for at least seven years.

Regardless of those rules, though, if the IRS suspects you filed a fraudulent return, no statute of limitations applies. Because the IRS is run and organized by fallible people (with all of their attendant biases, emotions, etc.), we suggest keeping your tax returns and documents forever.

Unfortunately, whenever the IRS challenges you, the burden of producing evidence that your claims are true rests entirely with you, so you had better have your documentation in order.

Taxpayers collectively spend six billion hours, or 8,758 lifetimes, annually trying to comply with the tax code. Fortunately, as I previously mentioned, YOU don’t have to be the one to do all the heavy lifting. We
are on your side…
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Take A Test Drive Of Your Retirement Plans!

Posted by on Feb 3, 2014 in General | 0 comments


“It doesn’t matter where you are, you are nowhere compared to where you can go.” -Bob Proctor

People over 40 shouldn’t just plan for retirement, they should rehearse for it.  Because retirement can last 20 to 30 years, it’s more important than ever that “pre-retirees” (those who plan to retire in five to seven years) practice how they want to live without work as the organizational focus of their lives:


Social Security Poster: old man

Social Security Poster: old man (Photo credit: Wikipedia)


Try out different retirement lifestyles
For example, many people dream of selling the family home and traveling in an RV or going abroad. Practice this by renting a camper and going on the road for a long vacation. You may discover that travel is exhausting or boring to you.

The same holds true for relocation dreams. Rent a home where you think you may want to retire to see if it really is where you’d like to move. The weather may not suit you, or the community may not be your cup of tea. Work out these details before you commit to an expensive change.

Live with your spouse 24 hours a day
Most couples spend much of their early years working and, thus, spending much of their time apart. It may take some time to get used to the other person’s schedule, habits, and routines.

Practice living on that retirement budget.
Most retirees’ income is significantly less than their preretirement income. Add up all the Social Security benefits, pension income, and 401(k) and IRA savings to calculate what you can realistically expect to live on each month. Then live on that amount for a month to determine what changes, if any, you need to make to your plans.

If you want to see how your investments might look when you retire, get back to us where we can we can do some nifty financial planning to see if  you have as much money as possible to last as long as you do! 
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The Power of Specialized Knowledge

Posted by on Jan 29, 2014 in Tax Planning and Preparation | 0 comments

Logo of the Internal Revenue Service

Logo of the Internal Revenue Service (Photo credit: Wikipedia)


“You must have long range goals to keep you from being frustrated by short range failures.” -Charles C. Noble

Some years ago, one of the major manufacturing companies in this country was facing a crisis. The central conveyor belt of its automated assembly line quit running and brought the entire plant to a stop.

Although they tried everything they could think of, and even brought in several consultants, no one was able to get the conveyor belt running again, or even to identify what caused the breakdown in the first place. The company was really in a bind. With on-going overhead, and the loss of production, the company was losing money at the rate of $1,000,000.00 a day.

Finally, after a week of down time, the big brass told the plant manager to call Tom — the mechanical engineer who had retired the year before, after 25 years with the company. The conveyor belt had been Tom’s specialty and primary responsibility.

When Tom got the call, he caught the next flight from the city where he now lived and arrived at the plant the next day. He met with both the local vice president and the plant manager to get as much information as he could as to what had happened and what they had tried. He then walked slowly along the belt until he came to a particular point.

He put his ear against the machine and listened. He asked for a hammer and then gave the machine a swift and forceful blow.

“Give it a try now!” he called to the foreman. The conveyor belt started right up and ran like a dream.

Tom then left and went back home, but before he did, the company vice president told him to send them a bill for what he had accomplished. Two days later, the company received Tom’s invoice for one million dollars!

Thinking that was way too high for the little time Tom had spent to solve the problem, and how he did so with just a single blow from a hammer, the company wrote back and asked Tom to provide them with an itemization. This was Tom’s response:

One hammer blow: $2.00
Knowing where to hit it: $999,998.00


With the receipt of that simple invoice, the company came to understand the reason for Tom’s fee and immediately issued a check to him for one million dollars!

Special knowledge is the key. Although the company’s leaders had to be reminded of that fact by receiving Tom’s invoice, as soon as it did, they knew he was right. They could have given hammers to every employee in the plant and even had the big brass banging on the machine from sunrise to sunset, but it would have done no good… because they didn’t have the knowledge; they didn’t know where to hit it.

This is an old story, told in different ways, with different names and amounts. But it’s powerful for a simple reason: labor is NOT about how much “time” is put into executing a particular solution to a problem — it’s knowing when and how to do it.

In the realm of preparing your tax return, I urge you… do NOT fall prey to the thinking that a software program or forms downloaded from the internet can suffice to enable you to preserve your resources, or properly leverage the multiplicity of credits, loopholes and deductions available.

Make sure you obtain the best help for your level of tax complexity.  You worked hard for your money, don’t waste it by saving a few pennies in doing your own tax returns. Get  professional assistance who has the specialized knowledge to save your hard earned money.

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Identity Thieves Want YOUR Tax Return!

Posted by on Jan 20, 2014 in Featured, Tax Planning and Preparation | 0 comments


“Show me someone who has done something worthwhile, and I’ll show you someone who has overcome adversity.” – Lou Holtz

It may not surprise you to learn that identity theft is annually the number one complaint made to the Federal Trade Commission (FTC). Well, the tax return component of this crime has been heating up.
Seal of the United States Federal Trade Commis...

Seal of the United States Federal Trade Commission. (Photo credit: Wikipedia)


 
In 2010, only about 15 percent of all identity theft complaints to the FTC dealt with tax returns. Well, in 2013, that jumped to 43 percent.

All the thief requires is your SSN, a few easily-forged counterfeit documents … and WHAMMO, they’ve got your expected refund.

In essence, to prevent this kind of theft of your refund, or your return filing status, you need to file your return before the thief does. Which is just another reason to start the process with us, ASAP (Here’s our number: 847-243-3600 — call us today).

The good news is that the IRS is aware of this problem, and they do have systems in place. If this DOES happen to you, we can help you work with the IRS to get it resolved. Alternatively, of course, you can call the IRS ID Theft Protection Unit yourself at (800) 908-4490, extension 245. The hold times … well, they’re not always fun. There will be paperwork to file and other things you will have to do as quickly as possible.

Which means that it’s nice to have someone in your corner who can handle this kind of thing on your behalf, right?

Other ways to protect yourself
Nobody can *guarantee* that they won’t get victimized, but here are a couple steps you can take to reduce the risk…

  • If you file by mail, go to the post office. Don’t place your documents in an unlocked mailbox in front of your house.
  • If you file electronically, use a secure computer on a secure network (which we happen to have). Never do anything financially sensitive from a public WiFi spot.
  • Get your return done as soon as you can. It really is in your best interest to file as early as possible.
 
Again, while we can never fully prevent bad things from happening, we certainly can help you cover your bases!


Give us a call and let’s see how we can help you.
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Kaufman’s 2014 Tax Time Document Chase List

Posted by on Jan 13, 2014 in Tax Planning and Preparation | 0 comments


“Don’t worry about failures, worry about the chances you miss when you don’t even try.” -Jack Canfield

Yes, this is a long list — but it’s the unfortunate reality of our tax code that it’s not even comprehensive! But these items will cover 95% of our clients.  Really, this is for ensuring that we’re able to help you keep every dollar you can keep under our tax code.

Logo of the Internal Revenue Service

Logo of the Internal Revenue Service (Photo credit: Wikipedia)



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
Copy of your latest utility bills

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 in here in 2014!
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New 2014, New Financial Goals

Posted by on Jan 3, 2014 in General | 0 comments


“No matter how dirty your past is, your future is still spotless.” – Drake

Not to make you feel guilty, but for every seven years you delay saving and investing for the future, you cut in half the income you would enjoy at the end of your life. So, let’s make 2014 the year we get on the right financial course, shall we?
 
Here are some suggestions to get started…
English: Picture I made for my goals article

English: Picture I made for my goals article (Photo credit: Wikipedia)



 
1) Set realistic goals. First, ask the right questions, and stay the course until you’ve found the answers. Goals that are shared are ten times more likely to be acted on. Don’t wait until you have everything set up, to seek out accountability.
 
2) Make those goals concrete, and then document them. Set your savings goals as a specific annual percentage of your adjusted gross income (AGI). It’s a great idea to save at least 10% of your AGI in tax-free retirement accounts and another 5% toward retirement in taxable investments. If you are behind on your savings, you may want to save even more in order to catch up.
 
3) Craft the best strategy to implement your goals, including prioritizing the appropriate retirement vehicles. Start by investing just enough to get the entire match from a company’s 401(k) plan (if you have one), and then fund your Roth IRA accounts next. After these two, make certain you have enough non-retirement savings and use what I call your “Private Reserve Strategy”.
 
4) And this is a BIG deal — automate your plan. Automating putting money in an employer-defined contribution plan is easy. Automating a taxable savings plan is just as painless. Most banks or brokers offer an automatic money link between an investment account and a checking account. They should also offer a monthly automatic transfer between the two accounts.
 
Going into further detail would actually entail sitting down and creating a true, full financial plan–which is impossible over email (but very do-able, in person).
 
But I will say one last thing: the most critical component of wealth management in the new year will be AGI minimization. With the new linkage between income and healthcare — and all of the related subsidies and reporting requirements, it’s never been more important to monitor what number upon which the IRS is basing their picture of you. Let us help you do it right.

 
I do hope all this helps.  IF you want more help, click on the link above to get your free report on reducing your taxes for 2014. 
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