A few updates for 2014.
1. Payroll Social Security (Employee) is 6.2%
2. Social Security Wage Limit has increased to $117,000
3. Business Miles decreased to 56 cents/mile; Relocation and Medical both decreased to 23.5 cents/mile; Charitable rate remains at 14 cents/mile and Depreciation decreased to 22 cents/mile.
4. Federal Minimum Wage for year 2013 (will update for year 2014 when rates have been confirmed) remains the same at $7.25/hr. State Minimum Wage for Georgia remains at $5.15/hr. The only states who have increased their minimum wage rate is Arizona $7.80, Colorado $7.78, Florida $7.79, Missouri $7.35, Montana $7.80 if their annual sales are $110K or more, Ohio $7.80 if annual sales exceed $283,000, Oregon $8.95, Rhode Island $7.75, Vermont $8.60, Washington $9.91.
5. Postage rates go up on 1/26/14 to Regular Letters (1 oz) 49 cents/stamp; Additional ounces will be 21 cents; International (1 oz) letters $1.15; Postcards 34 Cents each.
Tips for Landing Great Deals Online:
1. Sign up for your favorite retailer’s email notices.
2. Check your credit card website to see if there are special memberships/deals with stores.
3. Get e-coupon discount codes at bargainboardwalk.com and ecoupons.com. Also use search engines to type in the name of the store and add “coupon codes”.
4. Use shopping search engines like shopping.com, pronto.com and shopzilla.com.
5. Check sellers at Amazon and Ebay who sell new and used products for less.
6. Before you click to buy, compare the total price you’ll pay including shipping and taxes, with totals on other sites.
Audit Proof your Return to lower your risk of an audit before mailing!
Business Expenses: Keep receipts on telephone, travel, meals and entertainment mostly. Show a profit on your schedule C in at least 2 years out of every 5 years.
Rental Income: Know when to depreciate versus writing it off as an expense. Keep every bill and mileage log you have on your rentals/vacation homes for the year in detail.
Charitable Donations: Too large of a contribution will be cause for a red flag. Document and take pictures of your items as proof. If you have more than $500, you need to fill out form 8283. If more than $5000, it requires a written appraisal!
Records: No matter what you’re writing off, keeping records are crucial. Hold on to them for at least 7 years.
Facts About Filing Status:
1. Your marital status on the last day of the year determines your marital status for the year
2. If you have more than one filing status, choose the one that gives you the lowest tax obligation
3. Single status applies to anyone unmarried, divorced or legally separated according to state law
4. Married couples may file a joint return together
5. If your spouse died during the year and you did not remarry, you may still file a joint return – provided the joint return election is not revoked by a personal representative for the deceased spouse
6. A married couple may elect to file separate returns
7. Head of Household status applies to taxpayers who are unmarried. You must also have paid more than half the cost of maintaining a home for you and a qualifying person to qualify
8. You may be able to choose Qualifying Widow(er) with Dependent Child as your status if your spouse died in the previous year, you have a dependent child and you meet certain other conditions. See IRS publication 501 for more details on all mentioned statuses.
The IRS issued temporary regulations that require certain small employers to file the new Form 944 (Employer’s Annual Federal Tax Return) annually instead of filing Form 941 quarterly. In addition, employers that qualify to file Form 944 will pay their employment taxes once a year instead of every quarter. Only employers whose estimated annual employment tax liability is $1,000 or less are eligible to file Form 944 (usually this is for very small employers that pay no more than $4,000 in annual salaries that are subject to federal income tax withholding and FICA taxes).
The IRS plans to require credit card and other firms that process transactions to report gross transactions annually. Similar to processing 1096’s and W3’s. If a company’s receipts differ from the credit company’s reports, they will be audited or asked to explain the difference. You will have to now monitor and reconcile your reports. If you should find errors, request corrected statements. [IR-2009-106; REG-139255-08, Income Tax Regs]
ATM Scams: A team of organized criminals are installing equipment on bank ATMs in at least 2 regions to steal your card number and your pin. They mount their 2 devices cleverly on the machine and wait in a nearby car to receive the transmitted data. They have stolen thousands of dollars. Please take a moment to see what this device looks like by visiting www.utexas.edu/police/prevention, If you see any attachment like this, notify your bank and refrain from using that machine. Beware!
Don’t be scammed by Fake IRS notices.
1. The IRS does not ask for detailed personal and financial info such as pin #’s, passwords, credit card or bank or other financial account #’s.
2. The IRS does not send e-mails at all. If you receive an email such as that, do not reply to the message, do not open any attachments or click any links.
3. The official address of the IRS is http://www.irs.gov Do not view sites that end in .com, .net, .org or any other extensions.
4. If you receive a phone call, fax, email, or mail from an individual claiming to be from the IRS, contact the IRS at 1-800-829-1040 to determine if they IRS has a legitimate reason to call you.
5. You can help prevent these schemes and help others by learning what you can do in detail by visiting the IRS website and search the keyword “phishing”.
Between 1990 and 2008 personal savings dropped 34 percent while consumer credit jumped 215 percent according to the Federal Reserve System. A while ago, the American Dream was to own a home, buy a new car and have your kids go to college. Now the American Dream is to get out of debt. According to Experian, 51% of Consumers have at least 2 credit cards and 14% of consumers have more than 10 credit cards. Most people today have too much debt and not enough money to pay their bills, so they rely on credit cards. For the next few month, we’ll tackle a few ways to get out of debt without losing all your hair or having sleepless nights. Meanwhile, evaluate all your expenses and be prepared to start crunching some numbers. Happy Easter everyone!
Most debt problems arise from credit card problems. According to the Institute for Financial Literacy, 63% of personal bankruptcy is because they “overextended on credit”. Most folks run out of paycheck money and rely on credit cards to pay for whatever else they need, most of which are unnecessary. Impulse shopping is a huge culprit especially when people are bored, nervous, anxious or feel holiday obligations. As a result, they spend more than three times what they needed to actually buy. Believe it or not, there are about 6% of people who suffer from “Compulsive Buying Disorder”. It’s an addiction and they tend to have problems in their lives that make them feel powerless and unimportant. Shopping is soothing and calming for them. A final note would be to evaluate your paychecks and try to live within your means. Use credit cards for emergencies if possible.
According to the U.S. Bureau of Labor Statistics, the average American household brings home $49,639 after taxes. Housing eats up 34%, Transportation eats up 18% and Food eats up 12% all of which are about two-thirds of that income. How can you help this? Stop the snowball spending. For example, eat out less, watch movies at home and car pool. It might be a good idea to jot down everything you spend every time you spend money for a week and see where the money goes. After that, evaluate the list and see where you can cut back or substitute for cheaper items. For example, limit Starbucks to once a month and buy regular coffee or make coffee at home and use a to-go mug to take some to work. Eat breakfast at home as well.
A few money saving ideas. (1) If you can’t afford your mortgage, downsize. (2) Set your washing machine to cold only. (3) Pay credit cards early to avoid late fees. (4) Use a cloth at home instead of paper towels. (5) Shop around for gasoline before you fill your tank. (6) Check air pressure in your tires to give you better gas mileage. (7) Carpool. (8) Use coupons at the supermarket. (9) Take your breakfast and lunch to work. (10) Buy generic alternatives to drugs and call different drug stores to see which ones sell the item cheaper. (11) Rent a movie and invite friends instead of going out to one. (12) Shop for clothes at discount and factory outlets and especially on holidays or the day after. (13) Stop all memberships, sports programs, lessons unless vital to your career until your money is under control. (14) Buy store brand supplies for personal care when possible. (15) Color your own hair and do your own nails. (16) Cancel magazine subscriptions for things you don’t read. (17) Put a dollar amount on birthday and holiday gifts within your budget.
Please make sure you talk to your CPA about the new Medicare Surtax which becomes effective 1/1/2013. You can save on that with strategies implemented now in 2012. Also, note, itemized medical expenses are deductible only above 10% of your AGI instead of the current 7.5%. The 7.5% rate will continue to apply to taxpayers 65 yrs and older. More changes headed our way…be aware.
According to the Wall Street Journal, most credit card companies calculate your minimum monthly payment as 1% of your balance plus interest charges. Pay your minimum due on each credit card plus an extra $50 and it will reduce the amount of time you pay off the card tremendously. If you can afford more than $50 on top of the minimum, then go for it. You can save the $50 from some of the ideas in July’s post. You could also call each creditor and ask them to reduce the monthly minimum payment or reduce your interest charges. If you’ve tried all that, consider getting a part time job, collect on old debts, sell things you no longer need or use, have a yard sale, sell jewelry, use your tax refund, use your work bonus. On a final note, if you carry high balances on your cards, stop using them.
Are you prepared for a Tax Audit? (1) Keep Tax papers for 6 years after you file your tax returns. The IRS can legally audit you for that period. (2) Keep careful records of deductions, receipts and reasons for each expense. (3) Get help. Hire an enrolled agent, CPA or tax attorney. (4) Use software. Be able to show that the figures you used on your tax return have basis in reality. (5) Avoid penalties. The chances of an audit turning into a criminal investigation are slim. If you lose, you only usually have to pay the difference plus interest and penalties. Severe fraud penalties can be imposed for phony deductions and other fabrications. Happy Halloween to All!
Your income slows down in retirement but monthly bills remain the same. Three major bills to pay off before you stop working full time is (1) Mortgage: accelerate payments by reducing to a 15 yr mortgage or making additional principal payments. (2) Credit Cards: excessive debt at high interest is a disaster. Try to double the minimum payment if not more. (3) Car Loans: you can refinance or choose a less expensive car once you know you’ll not be working full time. Happy Thanksgiving to All!
Merry Christmas to All! Enjoy and be safe. To all my clients, thank you for another wonderful year.
Happy New Year!! Remember, as of January 1st, every employee’s paycheck will be 2% less because of the SS Tax going back to 6.2% instead of the current 4.2%. Dedicate time this month into browsing through your annual figures for year 2012 and compile your data for your CPA or Bookkeeper. If your income is still too high, consider contributing to your retirement plan to lower your tax liability. Remember to add any valuable items you receive over the holidays to your home inventory and change your homeowner policy to reflect them. If you’re in Medicare Advantage and want to switch to Original Medicare and join a Medicare prescription drug plan, you have until Feb 14th. Look for seasonal sales on carpeting, computers, cookware, linens, swimwear, toys, TVs and winter clothing. Also be on the lookout for W2’s, 1099’s, 1098’s and other tax papers needed for filing. Don’t wait until the last minute!
Happy Valentines Day! For this month: (1) Check your property tax assessment and file a claim to lower your tax if you feel it’s too high. (2) If you’re due a tax refund, file your 2012 tax return soon. (3) Get your free yearly credit report at annualcreditreport.com. (4) Buy seasonal sale items such as indoor furniture, small consumer electronics, ellipticals and treadmills. (5) Look for deals on condos and homes. (6) Keep an eye out for new credit card fees and if dissatisfied, look for better ones at bankrate.com, cardratings.com and lowcards.com.
Stay plugged in to our blog for a step by step guide on what to do if your name changes and how it could affect your tax return. Monthly tips will stop here. We are making an effort to gear all the financial details you’ll need to know throughout the year in our blog instead.