Don't pay Uncle Sam more than you have to! Tax day will be here before you know it, so take advantage of these tips before the end of the year to make April 15th a little easier to handle.
Tip 1: Be careful when buying a new mutual fund.
Most mutual funds pay out capital gains and dividend toward the end of the year. It's important to check for potential distributions before you buy a new fund to avoid a possible tax bill. The IRS doesn’t care how long you’ve a fund so you’ll be taxed even if you buy it just before the distribution. And since the share prices of funds and stocks drop by the amount they distribute, missing the dividend won’t affect your future return.
Tip 2: Prepay your property taxes.
Property tax payments aren’t due until the end of January, but you can deduct them this year if you pay them by the end of 2013. However, if you expect to be in a higher tax bracket next year, then it might make sense to wait until January to pay your 2013 property taxes and then prepay next year’s taxes by the end of 2014 in order to double your deduction in a single year.
Tip 3: Pay your January mortgage payment before December 31st.
Paying your January mortgage payment before the end of the year will increase your 2013 mortgage interest deduction by the extra amount of interest you pay in the January payment. This might not be a large deduction depending on your mortgage interest rate and outstanding loan balance, but every deduction counts!
Tip 4: Review your portfolio.
If you have investments in taxable accounts that are worth less than you paid for them, it might make sense to sell them by the end of the year to realize the loss. These losses can be written off against investment gains, and excess losses can be written off against income up to $3,000 then carried over to future years.
Tip 5: Defer income.
If you have your own business and use the cash method of accounting, you might be able to benefit from waiting until the end of the year to invoice customers so you don’t receive the income
– and have to pay taxes on it – until 2014.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com.
Showing posts with label taxes. Show all posts
Showing posts with label taxes. Show all posts
Monday, December 16, 2013
Thursday, April 18, 2013
2013 IRA Cheat Sheet - Get A Head Start On This Year's Contribution!
Did you remember to make a 2012 IRA contribution by the April 15th deadline? If not, you're not alone.
A recent study found that 58% of Americans don't have a retirement plan. The study also revealed that 20% of Americans plan on relying on Social Security for all of their retirement needs. That's a shocking revelation given the fact that the current average Social Security benefit is only $1,237 per month!
Don't let retirement sneak up on you. Even if you're only a few years away from leaving the workforce, there's still time to improve your financial outlook in retirement. Starting an IRA in 2013 is a great way to do it!
The following cheat sheet will help you determine which IRA is best for your financial situation.
The study sited was conducted by Deloitte Center for Financial Services. The 2013 IRA Contribution Cheat Sheet is used with permission from Greene IRA Success.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com.
A recent study found that 58% of Americans don't have a retirement plan. The study also revealed that 20% of Americans plan on relying on Social Security for all of their retirement needs. That's a shocking revelation given the fact that the current average Social Security benefit is only $1,237 per month!
Don't let retirement sneak up on you. Even if you're only a few years away from leaving the workforce, there's still time to improve your financial outlook in retirement. Starting an IRA in 2013 is a great way to do it!
The following cheat sheet will help you determine which IRA is best for your financial situation.
Created by 2013 Tax Rules
The study sited was conducted by Deloitte Center for Financial Services. The 2013 IRA Contribution Cheat Sheet is used with permission from Greene IRA Success.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com.
Thursday, March 28, 2013
2012 IRA Cheat Sheet - Don't Let Confusion Keep You From Contributing!
A recent survey found that almost half of Americans have little or no confidence that they'll be financially prepared for retirement. Many individuals in this situation plan on working longer, but that option could be cut short by bad health, disability, or loss of a job.
If you haven't started saving for retirement - or haven't saved enough - now's the time to start, and an individual savings account (IRA) is a great investment vehicle to use.
The deadline for making a 2012 IRA contribution is April 15, 2013, so you need to hurry if you want to contribute for last year. Confused about which IRA to select? Here's an excellent cheat sheet that will help you determine which IRA is best for your financial situation.
The study sited was conducted by the Employee Benefit Research Institute. The 2012 IRA Contribution Cheat Sheet was used with permission from Greene IRA Success.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com.
If you haven't started saving for retirement - or haven't saved enough - now's the time to start, and an individual savings account (IRA) is a great investment vehicle to use.
The deadline for making a 2012 IRA contribution is April 15, 2013, so you need to hurry if you want to contribute for last year. Confused about which IRA to select? Here's an excellent cheat sheet that will help you determine which IRA is best for your financial situation.
Created by Tax Code 2013
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com.
Tuesday, March 5, 2013
Make The Most Of Your Tax Refund
For many Americans, tax season means looking forward to a refund when they file their taxes. If you're one of the filers that will be getting money back, I have some good and bad news for you.
First, the bad news. A tax refund represents money you overpaid throughout the year, so it's basically an interest-free loan to Uncle Sam. Instead of overpaying and receiving a refund, you can use the IRS Form W-4 to adjust your tax withholding and keep more of your money throughout the year.*
The good news is that getting a tax refund offers you an opportunity to make some smart financial decisions. The average tax refund was around $2,800 in 2012, so many people receive enough to make a huge positive impact on their financial situation.
Here are a few smart options to use your tax refund.
Option 1. Pay off debt.
Paying off debt is the first thing to consider doing with your refund since dedicating a lump sum toward your debt is a great way to get started down the road to eliminating it completely. A low interest mortgage or student loan is one thing, but what about a high interest credit card or other loan?
Paying off high interest debt is an excellent financial move. Any extra dollar you put toward a debt will save you that percentage of interest over the next year. For example, if you have a credit card with an 18% interest rate, you'd essentially be earning an 18% return on every dollar you put toward that debt since you’d avoid that interest.
Option 2: Build your emergency fund.
Most people know that you should have from 3 to 6 months in a cash reserve, but not everyone has a reserve. A tax refund could be used to start a reserve if you don’t already have one, or use it to replenish your cash reserve if you’ve used some of the funds over the past year. You can check www.DepositAccounts.com or www.BankRate.com to find a no-fee, high-interest savings or money market account to use for your emergency fund.
Option 3: Fund an Individual Retirement Account (IRA).
You have until April 15th to make an IRA contribution for 2012, but if you miss that deadline you can still get a head start on 2013. Funding an IRA is a great way to prepare for retirement, and you can choose between Traditional IRAs that give you a tax deduction now or Roth IRAs that can provide tax-free income in retirement.
The maximum contribution for 2012 is $5,000, or $6,000 over 50, as long as you had at least this amount of earned income for the year. Both contribution limits are $500 higher for 2013, for a total of $5,500 and $6,500 respectively.
Option 4: Fund your college savings.
It’s often difficult to juggle saving for retirement with other financial goals like preparing for your children’s college education expenses. Using a tax refund as a lump sum contribution toward college savings can be a great way to save money for college without adding an extra monthly bill. You can go to www.savingforcollege.com to learn more about the different types of college savings plans.
*Be sure to consult your tax preparer for help determining your tax withholding. The IRS doesn't like it when you underpay!
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com.
First, the bad news. A tax refund represents money you overpaid throughout the year, so it's basically an interest-free loan to Uncle Sam. Instead of overpaying and receiving a refund, you can use the IRS Form W-4 to adjust your tax withholding and keep more of your money throughout the year.*
The good news is that getting a tax refund offers you an opportunity to make some smart financial decisions. The average tax refund was around $2,800 in 2012, so many people receive enough to make a huge positive impact on their financial situation.
Here are a few smart options to use your tax refund.
Option 1. Pay off debt.
Paying off debt is the first thing to consider doing with your refund since dedicating a lump sum toward your debt is a great way to get started down the road to eliminating it completely. A low interest mortgage or student loan is one thing, but what about a high interest credit card or other loan?
Paying off high interest debt is an excellent financial move. Any extra dollar you put toward a debt will save you that percentage of interest over the next year. For example, if you have a credit card with an 18% interest rate, you'd essentially be earning an 18% return on every dollar you put toward that debt since you’d avoid that interest.
Option 2: Build your emergency fund.
Most people know that you should have from 3 to 6 months in a cash reserve, but not everyone has a reserve. A tax refund could be used to start a reserve if you don’t already have one, or use it to replenish your cash reserve if you’ve used some of the funds over the past year. You can check www.DepositAccounts.com or www.BankRate.com to find a no-fee, high-interest savings or money market account to use for your emergency fund.
Option 3: Fund an Individual Retirement Account (IRA).
You have until April 15th to make an IRA contribution for 2012, but if you miss that deadline you can still get a head start on 2013. Funding an IRA is a great way to prepare for retirement, and you can choose between Traditional IRAs that give you a tax deduction now or Roth IRAs that can provide tax-free income in retirement.
The maximum contribution for 2012 is $5,000, or $6,000 over 50, as long as you had at least this amount of earned income for the year. Both contribution limits are $500 higher for 2013, for a total of $5,500 and $6,500 respectively.
Option 4: Fund your college savings.
It’s often difficult to juggle saving for retirement with other financial goals like preparing for your children’s college education expenses. Using a tax refund as a lump sum contribution toward college savings can be a great way to save money for college without adding an extra monthly bill. You can go to www.savingforcollege.com to learn more about the different types of college savings plans.
*Be sure to consult your tax preparer for help determining your tax withholding. The IRS doesn't like it when you underpay!
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com.
Monday, February 18, 2013
Tips For Finding Tax Preparer
Many Americans have already started preparing their taxes even though the deadline to file isn't until April 15th. While doing your own taxes might save you some money, the penalties and interest charged by the IRS for even a simple mistake can wipe out years of savings. Working with a tax preparer can free you from the stress of doing your taxes and help make sure they're done correctly.
Here are a few tips to follow when looking for a tax preparer.
Tip 1: Check the tax preparer’s qualifications.
An easy way to start your search for a qualified tax preparer would be to look for an Enrolled Agent (EA), Certified Public Accountant (CPA), or tax attorney. Anyone that carries one or more of these credentials will have gone through a lot of education, testing, and is required to do continuing education.
Just because someone isn't an EA, CPA, or attorney doesn't mean that he or she isn't qualified to do your taxes. It just means that you'll need to do more due diligence. One way to do this is ask if he or she is affiliated with any professional association that requires testing and/or continuing education.
Tip 2: Check the preparer’s history.
You can check up on an EA's background through the IRS Office of Enrollment. In Texas you can research a CPA’s history through the Texas State Board of Public Accountancy and a tax attorney’s history through the State Bar of Texas. You can also contact your local Better Business Bureau to see if there are any complaints against a tax preparer you’re considering.
Tip 3: Ask about fees.
Be sure to select a tax preparer that charges a flat fee, by the hour, or similar method. Avoid preparers that charge a percentage of the refund or make wild claims about how large of a refund they can get you. You want to make sure that the preparer you select doesn't have an incentive to bend the law to get you a larger refund.
Tip 4: Ask about availability after April 15th.
Many tax preparers are only available during tax season. This is especially true of preparers that work for many of the large franchises. If you want someone that will be available after April 15th – and this is important if you’re a business owner or have complicated tax situation – then make sure the person you’re working with will be available throughout the year.
Tip 5: Review the return before signing it.
You’re still responsible for the accuracy of the information on your tax return even if you pay someone to prepare it for you, so make sure you understand everything on the form before signing it. Ask questions about anything you're unsure of and never sign a blank return or tax form.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com.
Here are a few tips to follow when looking for a tax preparer.
Tip 1: Check the tax preparer’s qualifications.
An easy way to start your search for a qualified tax preparer would be to look for an Enrolled Agent (EA), Certified Public Accountant (CPA), or tax attorney. Anyone that carries one or more of these credentials will have gone through a lot of education, testing, and is required to do continuing education.
Just because someone isn't an EA, CPA, or attorney doesn't mean that he or she isn't qualified to do your taxes. It just means that you'll need to do more due diligence. One way to do this is ask if he or she is affiliated with any professional association that requires testing and/or continuing education.
Tip 2: Check the preparer’s history.
You can check up on an EA's background through the IRS Office of Enrollment. In Texas you can research a CPA’s history through the Texas State Board of Public Accountancy and a tax attorney’s history through the State Bar of Texas. You can also contact your local Better Business Bureau to see if there are any complaints against a tax preparer you’re considering.
Tip 3: Ask about fees.
Be sure to select a tax preparer that charges a flat fee, by the hour, or similar method. Avoid preparers that charge a percentage of the refund or make wild claims about how large of a refund they can get you. You want to make sure that the preparer you select doesn't have an incentive to bend the law to get you a larger refund.
Tip 4: Ask about availability after April 15th.
Many tax preparers are only available during tax season. This is especially true of preparers that work for many of the large franchises. If you want someone that will be available after April 15th – and this is important if you’re a business owner or have complicated tax situation – then make sure the person you’re working with will be available throughout the year.
Tip 5: Review the return before signing it.
You’re still responsible for the accuracy of the information on your tax return even if you pay someone to prepare it for you, so make sure you understand everything on the form before signing it. Ask questions about anything you're unsure of and never sign a blank return or tax form.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com.
Monday, January 14, 2013
It's Not Too Late To Reduce Your 2012 Taxes
Did the New Year sneak up on you? Were you too busy over the holidays to do any year-end tax planning? If so, don't worry! There are a few things you might still be able to do to reduce your 2012 tax bill.
Contribute to a Traditional IRA
One of the easiest tax deductions you can still take for last year is to contribute to a Traditional Individual Retirement Account (IRA). To claim an IRA deduction for 2012 you need to make the contribution by April 15th and designate it is a “prior-year contribution” when you deposit the money.
(Note that you could contribute to a Roth IRA instead of a Traditional IRA, but you don't get tax deductions for Roth contributions. You can learn more about IRAs here.)
The maximum contribution for 2012 is $5,000, or $6,000 if you’re over 50, as long as you had at least this amount of earned income for 2012. Keep in mind that your ability to deduct the contribution will depend on things like your filing status, whether you have a retirement plan at work, and your income level.
Contribute to a Health Savings Account (HSA)
If you have a high deductible health insurance plan you might be eligible to contribute to a health savings account, or HSA. Contributions are tax-deductible, money inside an HSA isn’t subject to taxes, and withdrawals are tax-free if they are for qualified medical expenses. Your HSA account balance can be rolled over to future years to save for future expenses.
For 2012, individuals can contribute up to $3,100 and families can contribute up to $6,250. You can contribute an extra $1,000 if you’re age 55 or older. Just like IRA contributions, contributions to HSAs for the 2012 tax year must be made by April 15.
Contribute to a SEP IRA
If you’re a business owner, there is still time to set up and fund a Simplified Employee Pension (SEP) IRA. The maximum contribution for 2012 is 25% of your wages up to a maximum contribution of $50,000, so this has the potential to be a huge deduction.
If you have employees you have to contribute the same percentage to their SEP IRAs as you contribute to yours, so keep this in mind when deciding how much to contribute. Contributions to SEP IRAs must be made by your tax-filing deadline including extensions, so you could potentially have up until October 15, 2013 to take this deduction on your 2012 tax return.
To learn more about our company - and find out how we are different from other financial advisors - visit www.VannoyAdvisoryGroup.com or call us at (210) 587-6433.
Contribute to a Traditional IRA
One of the easiest tax deductions you can still take for last year is to contribute to a Traditional Individual Retirement Account (IRA). To claim an IRA deduction for 2012 you need to make the contribution by April 15th and designate it is a “prior-year contribution” when you deposit the money.
(Note that you could contribute to a Roth IRA instead of a Traditional IRA, but you don't get tax deductions for Roth contributions. You can learn more about IRAs here.)
The maximum contribution for 2012 is $5,000, or $6,000 if you’re over 50, as long as you had at least this amount of earned income for 2012. Keep in mind that your ability to deduct the contribution will depend on things like your filing status, whether you have a retirement plan at work, and your income level.
Contribute to a Health Savings Account (HSA)
If you have a high deductible health insurance plan you might be eligible to contribute to a health savings account, or HSA. Contributions are tax-deductible, money inside an HSA isn’t subject to taxes, and withdrawals are tax-free if they are for qualified medical expenses. Your HSA account balance can be rolled over to future years to save for future expenses.
For 2012, individuals can contribute up to $3,100 and families can contribute up to $6,250. You can contribute an extra $1,000 if you’re age 55 or older. Just like IRA contributions, contributions to HSAs for the 2012 tax year must be made by April 15.
Contribute to a SEP IRA
If you’re a business owner, there is still time to set up and fund a Simplified Employee Pension (SEP) IRA. The maximum contribution for 2012 is 25% of your wages up to a maximum contribution of $50,000, so this has the potential to be a huge deduction.
If you have employees you have to contribute the same percentage to their SEP IRAs as you contribute to yours, so keep this in mind when deciding how much to contribute. Contributions to SEP IRAs must be made by your tax-filing deadline including extensions, so you could potentially have up until October 15, 2013 to take this deduction on your 2012 tax return.
To learn more about our company - and find out how we are different from other financial advisors - visit www.VannoyAdvisoryGroup.com or call us at (210) 587-6433.
Thursday, December 6, 2012
Year-End Tax Tips for 2012
Tip 1: Don't overreact to talk about the "Fiscal Cliff."
It's almost impossible to turn on the TV, listen to the radio, or pick up a newspaper without hearing or reading something about the "Fiscal Cliff" and the impending economic disaster headed our way. Before you make any changes to your investments, you should think about getting a second opinion from a CPA or fee-only advisor. It's usually not a good idea to react to media hype!
Tip 2: Be careful when buying a new mutual fund.
Most mutual funds pay out capital gains and dividends toward the end of the year, so you want to check for potential distributions before you buy a new fund. The IRS doesn’t care how long you’ve held a fund so you’ll be taxed even if you buy it just before the distribution. And since the share prices of funds and stocks drop by the amount they distribute, missing the dividend won’t affect your future return.
Tip 3: Prepay your property taxes.
Property tax payments aren’t due until the end of January, but you can deduct them this year if you pay them by the end of 2012. But if you expect to be in a higher tax bracket next year – due to tax increases or higher earnings in 2013 – then you could wait until January to pay and then prepay next year’s taxes in order to double up on the deduction.
Tip 4: Pay your January mortgage payment before December 31st.
Paying your January mortgage payment before the end of the year will increase your 2012 mortgage interest deduction by the extra amount of interest you pay in the January payment.
Tip 5: Review your portfolio.
If you have investments in taxable accounts that are worth less than you paid for them, it might make sense to sell them by the end of the year to realize the loss. These losses can be written off against investment gains, and excess losses can be written off against income up to $3,000. Unused losses can be carried over to future years.
Tip 6: Defer income.
If you have your own business and use the cash method of accounting, you might be able to benefit from waiting until the end of the year to invoice customers so you don’t receive the income – and have to pay taxes on it – until 2013.
To learn more about our company - and find out how we are different from other financial advisors - visit www.VannoyAdvisoryGroup.com or call us at (210) 587-6433.
It's almost impossible to turn on the TV, listen to the radio, or pick up a newspaper without hearing or reading something about the "Fiscal Cliff" and the impending economic disaster headed our way. Before you make any changes to your investments, you should think about getting a second opinion from a CPA or fee-only advisor. It's usually not a good idea to react to media hype!
Tip 2: Be careful when buying a new mutual fund.
Most mutual funds pay out capital gains and dividends toward the end of the year, so you want to check for potential distributions before you buy a new fund. The IRS doesn’t care how long you’ve held a fund so you’ll be taxed even if you buy it just before the distribution. And since the share prices of funds and stocks drop by the amount they distribute, missing the dividend won’t affect your future return.
Tip 3: Prepay your property taxes.
Property tax payments aren’t due until the end of January, but you can deduct them this year if you pay them by the end of 2012. But if you expect to be in a higher tax bracket next year – due to tax increases or higher earnings in 2013 – then you could wait until January to pay and then prepay next year’s taxes in order to double up on the deduction.
Tip 4: Pay your January mortgage payment before December 31st.
Paying your January mortgage payment before the end of the year will increase your 2012 mortgage interest deduction by the extra amount of interest you pay in the January payment.
Tip 5: Review your portfolio.
If you have investments in taxable accounts that are worth less than you paid for them, it might make sense to sell them by the end of the year to realize the loss. These losses can be written off against investment gains, and excess losses can be written off against income up to $3,000. Unused losses can be carried over to future years.
Tip 6: Defer income.
If you have your own business and use the cash method of accounting, you might be able to benefit from waiting until the end of the year to invoice customers so you don’t receive the income – and have to pay taxes on it – until 2013.
To learn more about our company - and find out how we are different from other financial advisors - visit www.VannoyAdvisoryGroup.com or call us at (210) 587-6433.
Wednesday, July 13, 2011
Mid-Year Financial Tips
My wife and I are huge baseball fans, and as such, the All Star Game marks the middle of summer and hence the middle of the year for us. Now that the All Star Game is over (Go National League!), it's a great time to review your finances and make midyear adjustments as needed.
Check your retirement plan contributions
If you have a retirement plan like a 401(k) or a 403(b) through your work, take time to review how much you’re contributing. Start making contributions if you haven’t started yet. And if you are contributing, make sure you're contributing enough to get the full match offered by your employer. (Repeat after me: Never turn down free money!)
The 401(k) and 403(b) contribution limit for 2011 is $16,500, or $22,000 if you're age 50 or older. This limit applies to your contribution, so your employer's match is on top of this amount.
Check your IRA contributions
Anyone with earned income is eligible to make contributions to an IRA. Contributions to a Traditional IRA are tax-deductible when made and taxable when withdrawn. Contributions to a Roth IRA aren't deductible but withdrawals are tax-free. Pairing after-tax Roth IRA contributions with pre-tax 401(k) or 403(b) contributions is a great way to balance current and future taxes.
The IRA contribution limit for 2011 is $5,000, or $6,000 if you're age 50 or older. You have until April 15, 2012 to make a contribution for 2011.
Check your portfolio allocations
The recommended mix of stocks and bonds for your portfolio will depend on things like your age, time horizon, and risk tolerance. But whatever your ideal mix is, your actual allocations will vary over time due to market fluctuations.
Rebalancing your portfolio back to your ideal allocation helps manage risk since it forces you to "sell high" (i.e. decrease exposure to investments that have gone up) and "buy low" (i.e. increase exposure to assets that have gone down).
Evaluate your estimated tax situation
Do you normally receive a large tax refund? Then you should consider changing your withholding to have less money withheld throughout the second half of the year. On the other hand, if you usually owe money at tax time, then you could increase your withholding to avoid having to write out a check to Uncle Sam next year.
Since taxes can be complicated - and penalties incredibly steep if you make mistakes - consider having a CPA or EA review your situation and make recommendations.
Start budgeting for the holidays
It’s no secret that the holiday season can strain our budgets. By starting to plan for now for the expenses associated with travel and gift giving at the end of the year you can avoid getting yourself into financial trouble. You can use www.bankrate.com to find a great high-yield savings account for your holiday savings fund.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com
Check your retirement plan contributions
If you have a retirement plan like a 401(k) or a 403(b) through your work, take time to review how much you’re contributing. Start making contributions if you haven’t started yet. And if you are contributing, make sure you're contributing enough to get the full match offered by your employer. (Repeat after me: Never turn down free money!)
The 401(k) and 403(b) contribution limit for 2011 is $16,500, or $22,000 if you're age 50 or older. This limit applies to your contribution, so your employer's match is on top of this amount.
Check your IRA contributions
Anyone with earned income is eligible to make contributions to an IRA. Contributions to a Traditional IRA are tax-deductible when made and taxable when withdrawn. Contributions to a Roth IRA aren't deductible but withdrawals are tax-free. Pairing after-tax Roth IRA contributions with pre-tax 401(k) or 403(b) contributions is a great way to balance current and future taxes.
The IRA contribution limit for 2011 is $5,000, or $6,000 if you're age 50 or older. You have until April 15, 2012 to make a contribution for 2011.
Check your portfolio allocations
The recommended mix of stocks and bonds for your portfolio will depend on things like your age, time horizon, and risk tolerance. But whatever your ideal mix is, your actual allocations will vary over time due to market fluctuations.
Rebalancing your portfolio back to your ideal allocation helps manage risk since it forces you to "sell high" (i.e. decrease exposure to investments that have gone up) and "buy low" (i.e. increase exposure to assets that have gone down).
Evaluate your estimated tax situation
Do you normally receive a large tax refund? Then you should consider changing your withholding to have less money withheld throughout the second half of the year. On the other hand, if you usually owe money at tax time, then you could increase your withholding to avoid having to write out a check to Uncle Sam next year.
Since taxes can be complicated - and penalties incredibly steep if you make mistakes - consider having a CPA or EA review your situation and make recommendations.
Start budgeting for the holidays
It’s no secret that the holiday season can strain our budgets. By starting to plan for now for the expenses associated with travel and gift giving at the end of the year you can avoid getting yourself into financial trouble. You can use www.bankrate.com to find a great high-yield savings account for your holiday savings fund.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com
Wednesday, June 22, 2011
Child Labor - Reduce Your Taxes By Putting Your Kids to Work!
Do you have a business? Do you have children? If you answered "yes" to both of these questions you might be able to cut your taxes by hiring your kids!
I grew up working for my Dad's surveying business. Aside from the fun I had working 12-hour days outside in 100+ degrees (Typed with sarcasm!), working with my Dad put spending cash in my pocket, taught me the value of a dollar, and provided him some much-needed tax relief.
How This Process Works
Paying your child to work shifts income from you to your child. This results in income tax savings since children are usually in a lower tax bracket than their parents. This can also reduce other types of taxes since children under 18 are exempt from Social Security and Medicare taxes and children under 21 are exempt from federal unemployment taxes.
For an example of how this process works, assume you are in the 28% tax bracket. You would pay approximately $4,330 in total taxes on the last $10,000 you earn.
Now assume you paid this $10,000 as a salary to your minor child instead of keeping it and paying taxes on it yourself. After taking the standard deduction of $5,800 (tax-year 2011), your child would have taxable income of $4,200 and would pay around $420 in taxes. This is a tax savings of $3,900 dollars!
Parent’s Total Tax: $4,330
Child’s Total Tax: $420
Tax Savings: $4,330 (Parent's Tax) - $420 (Child's Tax) = $3,910
Although this example is certainly overly simplified (Apologies to my CPA and EA friends!), it gives you an idea of how much you could save by paying your child to work in your business.
Four Rules to Follow
Here are four tests that must be passed before the IRS will allow you to deduct money you pay your children:
1. The services provided by your child must be ordinary and necessary expenses directly related to your business.
2. The amount paid to your child must be reasonable.
3. The services must actually be performed.
4. You must have incurred the expense in the year you take the deduction.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com
I grew up working for my Dad's surveying business. Aside from the fun I had working 12-hour days outside in 100+ degrees (Typed with sarcasm!), working with my Dad put spending cash in my pocket, taught me the value of a dollar, and provided him some much-needed tax relief.
How This Process Works
Paying your child to work shifts income from you to your child. This results in income tax savings since children are usually in a lower tax bracket than their parents. This can also reduce other types of taxes since children under 18 are exempt from Social Security and Medicare taxes and children under 21 are exempt from federal unemployment taxes.
For an example of how this process works, assume you are in the 28% tax bracket. You would pay approximately $4,330 in total taxes on the last $10,000 you earn.
Now assume you paid this $10,000 as a salary to your minor child instead of keeping it and paying taxes on it yourself. After taking the standard deduction of $5,800 (tax-year 2011), your child would have taxable income of $4,200 and would pay around $420 in taxes. This is a tax savings of $3,900 dollars!
Parent’s Total Tax: $4,330
Child’s Total Tax: $420
Tax Savings: $4,330 (Parent's Tax) - $420 (Child's Tax) = $3,910
Although this example is certainly overly simplified (Apologies to my CPA and EA friends!), it gives you an idea of how much you could save by paying your child to work in your business.
Four Rules to Follow
Here are four tests that must be passed before the IRS will allow you to deduct money you pay your children:
1. The services provided by your child must be ordinary and necessary expenses directly related to your business.
2. The amount paid to your child must be reasonable.
3. The services must actually be performed.
4. You must have incurred the expense in the year you take the deduction.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com
Wednesday, March 2, 2011
Don't Fall For These Tax Myths
Myth 1: It’s good to get a large tax refund.
Although it’s exciting to find out you’re getting a tax refund, it’s important to keep in mind where that money came from. Most refunds come from money that has been taken from your paychecks throughout the year. So getting a refund means you gave Uncle Sam an interest-free loan throughout the year. Instead of planning on a refund at tax time, consider adjusting your withholding so you get to keep more of your paycheck throughout the year.
Myth 2: Business owners can deduct all of their expenses.
As a business owner, I always like it when my friends say, “You pay for it. You can deduct it”. First of all, something has to be a legitimate business expense before you can deduct it. Second, many business costs like meals and entertainment are only partially deductible. And you can never deduct personal use of business assets like a car or cell phone.
Myth 3: You don’t have to pay your taxes by April 15th if you file an extension.
Filing an extension will give you additional time to “file” your taxes, but not to “pay” them. Any money you owe has to be paid by April 15th or you could owe substantial penalties and interest. You might want to send in an estimated tax payment if you’re filing an extension just to make sure you don't end up paying more than you need to.
Myth 4: Social Security benefits aren’t taxed.
Up to 85% of your Social Security benefit could be taxable under current law. The Social Security Administration’s website states that benefits usually aren’t taxed unless you have “substantial income in addition to your benefits”. They must have a different definition of “substantial” than I do because individual and joint filers could start paying taxes on their benefits at $25,000 and $32,000 in “combined income” respectively.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com.
Although it’s exciting to find out you’re getting a tax refund, it’s important to keep in mind where that money came from. Most refunds come from money that has been taken from your paychecks throughout the year. So getting a refund means you gave Uncle Sam an interest-free loan throughout the year. Instead of planning on a refund at tax time, consider adjusting your withholding so you get to keep more of your paycheck throughout the year.
Myth 2: Business owners can deduct all of their expenses.
As a business owner, I always like it when my friends say, “You pay for it. You can deduct it”. First of all, something has to be a legitimate business expense before you can deduct it. Second, many business costs like meals and entertainment are only partially deductible. And you can never deduct personal use of business assets like a car or cell phone.
Myth 3: You don’t have to pay your taxes by April 15th if you file an extension.
Filing an extension will give you additional time to “file” your taxes, but not to “pay” them. Any money you owe has to be paid by April 15th or you could owe substantial penalties and interest. You might want to send in an estimated tax payment if you’re filing an extension just to make sure you don't end up paying more than you need to.
Myth 4: Social Security benefits aren’t taxed.
Up to 85% of your Social Security benefit could be taxable under current law. The Social Security Administration’s website states that benefits usually aren’t taxed unless you have “substantial income in addition to your benefits”. They must have a different definition of “substantial” than I do because individual and joint filers could start paying taxes on their benefits at $25,000 and $32,000 in “combined income” respectively.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com.
Friday, February 11, 2011
Post Year-End Tax Tips
Here are a few tips that might help you reduce your 2010 tax bill.
Tip 1: Contribute to a Traditional IRA
One of the easiest last minute deductions is a Traditional IRA contribution. To claim an IRA deduction for 2010, you need to make the deposit by April 15th and state that it's a contribution for 2010 when making the deposit.
The maximum contribution for 2010 is 100% of earned income or $5,000, whichever is less. If you're over 50 you can contribute an additional $1,000 for a total contribution of $6,000. Also, a nonworking spouse can make an IRA contribution as long as you file a joint return and the working spouse has enough earned income to cover the contribution.
Keep in mind that the ability to deduct the contribution will ultimately depend on your filing status, whether you have a retirement plan at work, and your income level.
Tip 2: Contribute to a Health Savings Account
If you have a high deductible health insurance plan you might be eligible to contribute to a health savings account (HSA). Contributions to HSAs are tax-deductible, money inside HSAs isn't taxed, and withdrawals for qualified medical expenses are tax-free. Another nice benefit of HSAs is that you can roll over your account balances to future years.
Individuals can contribute up to $3,050 and families can contribute up to $6,150 for 2010 as long as the plan’s deductible is at least this amount. Just like contributions for IRAs, contributions to HSAs for the 2010 tax year must be made by April 15th.
Tip 3: Contribute to a SEP IRA
If you’re a business owner, there's still time to set up and fund a Simplified Employee Pension (SEP) IRA. The maximum contribution for 2010 is 25% of your wages up to a maximum contribution of $49,000, so this has the potential to be a huge deduction.
If you have employees you will have to contribute the same percentage to their SEP IRA accounts as you contribute to yours, so keep this in mind when deciding how much to contribute. Contributions to SEPs can be made by your tax-filing deadline including extensions.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com
Tip 1: Contribute to a Traditional IRA
One of the easiest last minute deductions is a Traditional IRA contribution. To claim an IRA deduction for 2010, you need to make the deposit by April 15th and state that it's a contribution for 2010 when making the deposit.
The maximum contribution for 2010 is 100% of earned income or $5,000, whichever is less. If you're over 50 you can contribute an additional $1,000 for a total contribution of $6,000. Also, a nonworking spouse can make an IRA contribution as long as you file a joint return and the working spouse has enough earned income to cover the contribution.
Keep in mind that the ability to deduct the contribution will ultimately depend on your filing status, whether you have a retirement plan at work, and your income level.
Tip 2: Contribute to a Health Savings Account
If you have a high deductible health insurance plan you might be eligible to contribute to a health savings account (HSA). Contributions to HSAs are tax-deductible, money inside HSAs isn't taxed, and withdrawals for qualified medical expenses are tax-free. Another nice benefit of HSAs is that you can roll over your account balances to future years.
Individuals can contribute up to $3,050 and families can contribute up to $6,150 for 2010 as long as the plan’s deductible is at least this amount. Just like contributions for IRAs, contributions to HSAs for the 2010 tax year must be made by April 15th.
Tip 3: Contribute to a SEP IRA
If you’re a business owner, there's still time to set up and fund a Simplified Employee Pension (SEP) IRA. The maximum contribution for 2010 is 25% of your wages up to a maximum contribution of $49,000, so this has the potential to be a huge deduction.
If you have employees you will have to contribute the same percentage to their SEP IRA accounts as you contribute to yours, so keep this in mind when deciding how much to contribute. Contributions to SEPs can be made by your tax-filing deadline including extensions.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com
Monday, January 4, 2010
IRAs
What is an IRA?
An IRA (Individual Retirement Account) is an investment account that receives favorable tax treatment and is designed to help individuals save for retirement. While there are many different types of IRAs, Traditional and Roth IRAs are the two most common types.
What’s the difference between Traditional and Roth IRAs?
Contributions to Traditional IRAs are tax-deductible when made and withdrawals are taxed as income in retirement. While contributions to Roth IRAs don’t reduce your taxes now, they can provide a source of tax-free income in retirement. Regardless of the type of IRA you have, the account balance will grow tax-free while in the account, helping you accumulate more over time than you would in a taxable investment.
Is it true that Roth IRAs are better for younger investors and that older investors should opt for a Traditional IRA?
There are a lot of exceptions to that “rule of thumb”. For example, Roth IRAs avoid required minimum distributions at age 70 ½ that could force you to pay taxes on money you don’t even need. Roth IRAs also offer certain estate-planning benefits.
What’s the maximum that someone can contribute to an IRA?
The maximum contribution for 2009 and 2010 is $5,000, or $6,000 if you’re 50 or older. But the actual amount you can contribute will “phase-out” at certain income levels, and Traditional IRA contributions aren’t deductible in certain situations, so get advice if you don’t understand the specifics.
Is it too late to make a contribution for 2009?
You can make a 2009 contribution up until April 15, 2010 and can make a 2010 contribution from now until April 15, 2011.
An IRA (Individual Retirement Account) is an investment account that receives favorable tax treatment and is designed to help individuals save for retirement. While there are many different types of IRAs, Traditional and Roth IRAs are the two most common types.
What’s the difference between Traditional and Roth IRAs?
Contributions to Traditional IRAs are tax-deductible when made and withdrawals are taxed as income in retirement. While contributions to Roth IRAs don’t reduce your taxes now, they can provide a source of tax-free income in retirement. Regardless of the type of IRA you have, the account balance will grow tax-free while in the account, helping you accumulate more over time than you would in a taxable investment.
Is it true that Roth IRAs are better for younger investors and that older investors should opt for a Traditional IRA?
There are a lot of exceptions to that “rule of thumb”. For example, Roth IRAs avoid required minimum distributions at age 70 ½ that could force you to pay taxes on money you don’t even need. Roth IRAs also offer certain estate-planning benefits.
What’s the maximum that someone can contribute to an IRA?
The maximum contribution for 2009 and 2010 is $5,000, or $6,000 if you’re 50 or older. But the actual amount you can contribute will “phase-out” at certain income levels, and Traditional IRA contributions aren’t deductible in certain situations, so get advice if you don’t understand the specifics.
Is it too late to make a contribution for 2009?
You can make a 2009 contribution up until April 15, 2010 and can make a 2010 contribution from now until April 15, 2011.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com
Wednesday, November 25, 2009
Year-End Tax Tips
Tip 1: Be careful when buying a new mutual fund.
Most mutual funds pay out capital gains and dividends toward the end of the year, so check for potential distributions before you purchase a new fund. And think twice before purchasing a fund that will be distributing a large amount of gains and dividends.
The IRS doesn't care how long you’ve held a mutual fund when it comes to taxes on distributions. Investors that purchase a fund just before the payout will be taxed the same as the investors that have held the fund throughout the year.
Tip 2: Prepay your property taxes.
Property tax payments aren’t due until the end of January, but if you pay them before the end of the year you can claim the deduction in 2009. But if you expect to be in a higher tax bracket next year, you can wait until January to pay then prepay next December so you can deduct two years of property taxes in 2010.
Tip 3: Pay your January mortgage payment before December 31st.
By paying your January mortgage payment before the end of the year, you’ll be able to increase your mortgage interest deduction this year by the extra amount of interest you pay in the January payment.
Tip 4: Review your portfolio.
Investment gains can be reduced by investment losses, and excess losses can be written off against income up to $3,000 and rolled over to future years. But before you start selling investments, remember that the long-term capital gains tax rate for individuals in the 10 and 15% tax brackets is 0%, and this is scheduled to continue through 2010.
Tip 5: Defer income.
If you’re self-employed and use the cash method of accounting, you might be able to benefit from waiting until the end of the year to invoice customers so you don’t receive the income until January. This is especially beneficial if you expect to be in a lower tax bracket next year.
Tip 6: Contribute to your 401(k) or 403(b)
Contributions to 401(k)s and 403(b)s will reduce your taxable income for the year. In addition to saving money on taxes, you'll also receive "free money" from your company if they match your contribution.
This and all other posts on this blog are for informational purposes only. This is not to be considered tax advice and is not intended to be used, and cannot be used, for the purpose of (1) avoiding tax penalties under the Internal Revenue Code or (2) promoting, marketing, or recommending to another party any transaction or matter addressed herein.
Most mutual funds pay out capital gains and dividends toward the end of the year, so check for potential distributions before you purchase a new fund. And think twice before purchasing a fund that will be distributing a large amount of gains and dividends.
The IRS doesn't care how long you’ve held a mutual fund when it comes to taxes on distributions. Investors that purchase a fund just before the payout will be taxed the same as the investors that have held the fund throughout the year.
Tip 2: Prepay your property taxes.
Property tax payments aren’t due until the end of January, but if you pay them before the end of the year you can claim the deduction in 2009. But if you expect to be in a higher tax bracket next year, you can wait until January to pay then prepay next December so you can deduct two years of property taxes in 2010.
Tip 3: Pay your January mortgage payment before December 31st.
By paying your January mortgage payment before the end of the year, you’ll be able to increase your mortgage interest deduction this year by the extra amount of interest you pay in the January payment.
Tip 4: Review your portfolio.
Investment gains can be reduced by investment losses, and excess losses can be written off against income up to $3,000 and rolled over to future years. But before you start selling investments, remember that the long-term capital gains tax rate for individuals in the 10 and 15% tax brackets is 0%, and this is scheduled to continue through 2010.
Tip 5: Defer income.
If you’re self-employed and use the cash method of accounting, you might be able to benefit from waiting until the end of the year to invoice customers so you don’t receive the income until January. This is especially beneficial if you expect to be in a lower tax bracket next year.
Tip 6: Contribute to your 401(k) or 403(b)
Contributions to 401(k)s and 403(b)s will reduce your taxable income for the year. In addition to saving money on taxes, you'll also receive "free money" from your company if they match your contribution.
Keep in mind that some 401(k) plans now offer employees the option of making "Roth type" contributions that don't reduce your current taxes but will be tax-free when withdrawn if you meet the requirements.
Tip 7: Contribute to a Traditional IRA
Contributions to a Traditional IRA will reduce your taxable income for the year just like contributions to 401(k) and 403(b) plans. Just make sure you are eligible to deduct the amount you contribute. (Click here to check the deduction limits for 2009.)
Tip 8: Don't contribute to your 401(k), 403(b), or Traditional IRA
Yes, this tip contradicts tips 7 and 8. The point of this tip is that you need to balance current tax savings with future tax savings. It might be better for you to avoid taking a tax deduction now in favor of contributing to a Roth IRA, or making "Roth type" contributions to your 401(k), in order to have a source of tax-free income in retirement.
Deciding whether to take the tax deduction now or later involves some calculations, knowledge of current tax law, forecasts about future tax law, and a little bit of "gut feeling"; so consult your tax advisor or a "fee-only" financial advisor if you want professional guidance.
Tip 7: Contribute to a Traditional IRA
Contributions to a Traditional IRA will reduce your taxable income for the year just like contributions to 401(k) and 403(b) plans. Just make sure you are eligible to deduct the amount you contribute. (Click here to check the deduction limits for 2009.)
Tip 8: Don't contribute to your 401(k), 403(b), or Traditional IRA
Yes, this tip contradicts tips 7 and 8. The point of this tip is that you need to balance current tax savings with future tax savings. It might be better for you to avoid taking a tax deduction now in favor of contributing to a Roth IRA, or making "Roth type" contributions to your 401(k), in order to have a source of tax-free income in retirement.
Deciding whether to take the tax deduction now or later involves some calculations, knowledge of current tax law, forecasts about future tax law, and a little bit of "gut feeling"; so consult your tax advisor or a "fee-only" financial advisor if you want professional guidance.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com.
This and all other posts on this blog are for informational purposes only. This is not to be considered tax advice and is not intended to be used, and cannot be used, for the purpose of (1) avoiding tax penalties under the Internal Revenue Code or (2) promoting, marketing, or recommending to another party any transaction or matter addressed herein.
Subscribe to:
Posts (Atom)