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Tax Scams Oh My!

By | 2019, Money Moxie, Newsletter | No Comments

The tax season is upon us, and there is no shortage of nefarious individuals looking to make money. Here is a list of potential scams to watch out for–not only during tax season but all of the time:

(1) Phishing emails – these are typically unsolicited emails sent to you posing as legitimate IRS emails. They may contain links taking you to fake websites that ask you to provide personal information. The IRS will never initiate contact with you via email or social media.

(2) Phone – beware of individuals calling and claiming they’re from the IRS. They may threaten you that you owe money and that you will be arrested. They may even say you are entitled to a large refund from the IRS.

Don’t be fooled if the Caller ID on your phone even says the IRS. They can spoof that information. These bad guys are that good. Don’t give them any information. Reach out to the IRS for assistance at IRS.gov.

(3) Tax return preparer fraud – during tax season these scammers pose as legitimate tax preparers. They often promise unreasonably large refunds. They take advantage of unsuspecting taxpayers by committing refund fraud or identity theft.

(4) Fake charities – scam artists sometimes pose as a charity in order to solicit donations. Often these appear after a natural disaster hoping to capitalize on the tragedy.

(5) Tax-related identity theft – this happens when an individual uses your Social Security number to claim your refund. This may not even be discovered until you try to file your return. The IRS may even send a letter to you indicating that they’ve identified a suspicious return.

If you or a loved one has been a victim of identity theft, the Identity Theft Resource Center offers free help and information to consumers at idtheftcenter.org.

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Tax Law Changes

By | 2019, Money Moxie, Newsletter | No Comments

The first significant tax reform in over three decades was put into action for 2018. Now we get to see the real impact of the Tax Cuts and Jobs Act as people start to file their 2018 tax return.

Whether you are filing your tax return or you want to make sure you give your accountant the best information possible, here are the major changes to which you should pay attention.

Form 1040 significantly shortened and simplified
One of the major goals for this tax reform was to “simplify” taxes. The immediate impact is that the old Form 1040 will be shrunken down to a half page on front and back. Now there will only be 23 lines compared to the daunting 79 lines on the old 1040. There will no longer be a form 1040A or 1040EZ as those were just an attempt to simplify an overly complex 1040. The new 1040 will be accompanied by 6 schedules.

If this shortened version makes you feel like attempting to do your taxes for the first time in a while, you should probably still take them to your accountant as there are so many tax changes that you really need an expert that knows how all of the changes will impact you. If you have been filing your own taxes, they should be easier this year (should being the keyword).

Tax brackets
Tax brackets have been reduced, which should benefit almost all people. Tax brackets are based on your total amount of taxable income, not adjusted gross income.

For example, if a couple’s joint taxable income was $75,000 in 2017, they were in the 15-percent bracket and in 2018 will be in the 12-percent bracket. The 25-percent bracket has been reduced to 22 percent.

Changes to the standard deduction and exemptions
The most significant changes for individuals happened to the standard and itemized deductions. With the changes, it is estimated that 80-90 percent of people will now take the standard deduction. However, don’t throw out your box of medical receipts yet. You still need to make sure itemizing is no longer a benefit for you.

The standard deduction limit has been raised from $6,350 to $12,000 for single filers and from $12,700 to $24,000 for married filers. They also did away with personal exemptions that were $4,050 per person, but offset that loss for families with children by increasing the child tax credit from $1,000 to $2,000 per child. There is also an extra deduction of $1,600 for single filers and $2,600 for married filers if you are over age 65. (For a more complete list, please visit:
smedleyfinancial.com/financial/2019-key-numbers.php.)

Specific changes to itemized deductions
State and local tax deduction has been limited to $10,000. You can still deduct medical expenses that exceed 7.5 percent of your adjusted gross income, and that limit will be going up to 10 percent in 2019.

Mortgage interest can be deducted up to a principal value of $750,000 if the loan originated in 2017 or later. Older loans will be grandfathered in and interest is deductible up to a principal limit of $1,000,000. Mortgage equity loans will only be deductible if the proceeds were used for home improvement. (Say goodbye to consolidating debt into a home equity loan and deducting it.)

This major overhaul to the tax system should simplify taxes and should make it so most people take the standard deduction. Most people should also end up paying a little less in taxes, which is always nice.

Let’s look at an example
In 2017, Jay and Mary filed a joint tax return. They are both age 55 and they don’t have any dependents. They had $18,000 in itemized deductions. Add to this their personal exemption of $4,050 each, totaling $26,100 in deductions. In 2018, they will only get the standard deduction of $24,000 with no personal exemptions and may owe more in taxes. The saving grace for Jay and Mary is that their tax bracket was reduced and may make up for the reduction in deductions.

SFS and its representatives do not provide tax advice; it is important to coordinate with your tax advisor regarding your specific situation.

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Preparing 2018 Taxes

By | 2019, Money Moxie, Newsletter | No Comments

Tax reporting documents
While you may be anxious to get your taxes done, you can avoid filing amended returns by assuring you have all final tax documents to provide to your tax preparer.

Most 1099 tax forms will be available between January 27th and February 16th.

If you have an account with National Financial Services, please be aware of the following timelines for receiving your tax documents.

Some securities companies may not deliver National Financial Services with final tax information by the first mailing date. In this case, you will not receive a 1099 until the final information is available. A preliminary tax statement will be available online only. This will not be reported to the IRS and cannot be used for filing purposes.

All 1099s will be available online and mailed no later than March 8th.

If you have signed up to receive electronic documents, you can access the tax documents through your Wealthscape access. If you signed up to receive tax documents electronically only, you will not receive them in the mail.

Qualified Charitable Distributions (QCD)
If you made a qualified charitable distribution from your IRA during 2018, please let your tax preparer know. Your 1099R form should indicate that the taxable amount is undetermined by a checked box in 2b “Taxable amount not determined.”

You will also need to provide documentation from the charity that your donation was received. This should not count as income for tax purposes and should not be an itemized deduction.

Consult your tax advisor for further information regarding the preparation of your taxes. If you have questions regarding the delivery of your tax documents, please contact our office at 801-355-8888.

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Will You Benefit From the Recent Tax Cut?

By | 2018, Money Moxie, Newsletter | No Comments

Changes to the marginal tax-brackets will benefit those who are close to the threshold for the 10 percent thru 32 percent brackets. If your income is $400,000, you will hit the 35 percent marginal bracket with less income than in 2017. One notable change is the top bracket–now 37 percent–affecting those with income of $600,000 or more.

2018 Marginal Tax Rates

Contribution Limits

Retirement contribution limits for some plans have been increased while others remain the same.

Standard Deductions

By increasing the standard deduction, the government will effectively reduce the number of filers who itemize. The new married limit is $24,000 and the single limit is $12,000. Both are double last year’s limits.

Itemized Deductions

The new law contains limitations that change the value of itemizing deductions for many filers.

Alternative Minimum Tax

The number of filers affected by the Alternative Minimum Tax is expected to drop by 96%. And many filers may not have to pay AMT again. This is due to two big changes (below).

Higher exemption levels–the amount of income automatically exempt from AMT calculation has increased to $109,400 for married and $84,500 for single.

Higher exemption phase-out levels–the income level above which you gradually lose your income exemption. The phase-out levels increased to $1,000,000 for married and $500,000 for single.

*Smedley Financial and its employees do not provide tax advice; therefore it is important to coordinate with your tax advisor regarding your specific situation.

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How Proposed Tax Changes Might Impact You

By | 2017, Money Moxie | No Comments

First a disclaimer–As this article went to print in late November, the tax overhaul bill had not been finalized. That being said, here are some areas that both the House and Senate agree on in some aspects and will likely make it to the final cuts.

In an effort to reduce the number of filers that itemize, both the House and the Senate are pushing to double the standard deduction, $24,400 and $24,000 respectively. At first glance this looks good. However, there is a caveat. Both want to repeal the personal exemption for each family member, which is $4,150 in 2018. This could have a big impact on large families.

Other items that will impact tax payers: state and local taxes would no longer be deductible. Alternative Minimum Tax (AMT) would be repealed. The estate-tax exemption would be increased from $5 million per individual to $11.2 million per individual and $22.4 million per married couple.

The above chart provides insight into the impact on taxpayers should current proposals play out. For now, all we can do is sit on the sidelines, watch the show, and hope for a practical solution for everyone.

*Smedley Financial and its employees do not provide tax advice; therefore it is important to coordinate with your tax advisor regarding your specific situation.

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Finding a Way to Boost Economic Growth

By | 2017, Newsletter, Viewpoint | No Comments

When Donald Trump was running for president, he promised Americans a huge increase in economic growth reaching 4, 5, and even 6 percent. However, real economic growth in 2017 is expected to be around 2.1 percent–equaling the average over the last 10 years.2 Boosting growth will require overcoming challenges and capitalizing on opportunities. 1

 

 

 

(1) David Payne, “Goldilocks GDP Growth: Not Too Hot, Not Too Cold,” Kiplinger, July 28, 2017.
(2) Federal Reserve Bank of St. Louis.
(3) Nick Timiraos and Andrew Tangel, “Can Trump Deliver 3% Growth? Stubborn Realities Stand in the Way,” WSJ, May 15, 2017.
(4) Glenn Kessler, “Do 10,000 Baby Boomers Retire Every Day?,” The Washington Post, July 24, 2014.
(5) Amanda Dixon, “The Average Retirement Age in Every State in 2016,” Fox News, December 28, 2016.

The opinions and forecasts expressed are those of the author and may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or investment plan. SFS is not affiliated with any companies mentioned in this commentary.

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2017 Tax Update

By | 2017, Money Moxie, Newsletter | No Comments

2017 Tax Deadline: April 18th
For you procrastinators, there is some good news regarding taxes this year: the tax filing deadline has been moved back to April 18th because the 15th falls on a Saturday and Monday the 17th is a holiday in the District of Columbia. However, you should not wait until the bitter end.

Even if you have to pay, we recommend submitting your return a week in advance just to avoid any possible issues. If you are due a refund, why wait? Get your money now! If you have more questions about tax brackets or other important numbers, please check out our website.

IRA/Roth IRA Contributions
Don’t rob from your future self. Make a payment to your future security. As with taxes, you also have until April 18th to make contributions into your IRA or Roth IRA. (But don’t wait that long or you risk missing the deadline!) Remember that IRA contributions lower your current taxes. They make sense if you are in a high tax bracket now and you will be in a lower one at retirement.

Roth contributions do not lower your current taxes, but they do grow tax free. If you are currently in a low tax bracket and will be in a higher one at retirement, or if you are a long way from retirement, then Roth contributions may be the best option for you.

You can contribute $5,500 total per person to an IRA or Roth. If you are over age 50, you can make a catch-up contribution of $1,000 for a total of $6,500 per year.

If you are eligible for a 401(k) through work and if your income exceeds a certain amount, your ability to deduct IRA contributions or make Roth contributions may be limited. Please consult with your CPA or check out our website to get more information regarding the phase-out limits.

Tax Forms
All of the tax forms have been mailed out, including the delayed tax reporting on non-retirement accounts. We are sorry (especially to the accountants) that the IRS has allowed delays in order for reporting companies to provide more accurate information.

If you still haven’t seen your tax forms, log in to your myStreetscape account and download the forms under the documents section. If you do not have a login, go to www.mystreetscape.com and click “register.” Then follow the prompts to create an account. You can use the same myStreetscape login to go paperless for the future.

In April, myStreetscape is being renamed to Wealthscape. You will be able to use the same login credentials after the transition.

Qualified Charitable Distributions
We’ve had several questions, from clients and accountants, regarding Qualified Charitable Distributions (QCD) that were sent directly to charities.
A quick recap: If you are over 70 ½ years old, a QCD allows you to donate part or all of your Required Minimum Distribution (RMD) to a charity and avoid paying tax on it.

The 1099-R’s sent by National Financial Services (NFS) show the total amount of distributions and are not reduced by the amount of the QCD. So, the tax preparer should reduce the amount reported on the 1099 by the amount of the QCD to come up with the taxable amount of IRA distributions.

The QCD should NOT be included as an itemized deduction. The potential benefit of the QCD is to remove the IRA distribution from your income, which may lessen the amount of Social Security subject to tax or help you avoid Alternative Minimum Tax (AMT). Smedley Financial does not give tax advice. Please consult a qualified CPA to get additional detail.

Source: http://www.smedleyfinancial.com/financial/2017-key-numbers.php. Tax advice is not provided by Securities America representatives; therefore it is important to coordinate with your tax advisor regarding your specific situation.

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Election Impact

By | 2016, Money Moxie, Newsletter | No Comments

President-elect Donald Trump made a lot of promises to Americans on the campaign trail. Yes, he proposed building a wall on the Mexican border and blocking certain groups from immigrating to the United States, but none were more important to voters than how the candidate would impact their money.

Trump believes his economic plans will double U.S. growth, which is currently at 2.9 percent. He plans to focus on cutting taxes for the rich, increasing government spending, and negotiate better trade deals with foreign countries. If necessary, he has even suggested imposing tariffs on imports of goods to the United States.

Republicans will control the Senate and House of Representatives, so the next president may find it easier to get things done, especially at first. Here are a few of the promises made during Trump’s campaign.

Jobs

The foundation of the United States is firm and its economy is strengthening. Unemployment numbers cannot get much better than current levels. Wage growth may be a more valuable measure of economic health. Infrastructure spending of $500 billion may help by boosting productivity of Americans in the long-term.

Education and Family

  • Require paid maternity leave for 6 weeks.
  • Make child care expenses tax deductible.
  • Allow “dependent care savings accounts.”

Healthcare

    When it comes to healthcare, any president faces an aging population and rising costs of new medical technology. Trump plans to repeal the Affordable Care Act and replace it with something different.
  • Make health insurance premiums tax deductible.
  • Encourage health insurance to be sold across state lines (something already allowed by federal law).
  • Allow imports of foreign drugs where prices are cheaper.

Taxes

    Trump has proposed many changes to the tax code. The greatest impact will be on the top one percent of earners who are estimated to save about $100,000 in taxes every year.
  • Increase the standard deduction to $30,000 for joint filers from its current level of $12,600.
  • Eliminate the personal exemption of $4,050 per dependent that parents use.
  • Eliminate estate tax.
  • Eliminate alternative minimum tax.
  • Lower corporate tax to 15 percent.

Investments

In the coming months very little should change. Increased government spending on infrastructure combined with tax cuts roughly the same size could boost growth in the coming year or two. It would also increase the national debt significantly. This could depress the value of existing bonds as interest rates rise on U.S. debt.

If we raise tariffs and other countries do the same then global trade could decrease and the cost of goods could rise. Less trade would also decrease profitability for U.S. exporters. This could even cost workers their jobs.

Our advice? Vote with your ballot, not your portfolio. Think of all the missed opportunity if one withdrew whenever there was uncertainty. Whether your favored candidates were elected or not, we want to reinforce the importance of sticking to your long-term plans.

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IRA Charitable Donations Are Back…and This Time They Are Here to Stay!

By | 2016, Money Moxie | No Comments

For those of you over age 70 ½, a very beneficial tax law is back on the books thanks to the Protecting Americans from Tax Hikes (PATH) act signed into law on December 18, 2015.

The PATH act has a provision that allows you to donate IRA money directly to a qualifying charity and avoid paying any tax on the distribution. Even better, the distribution still counts toward your Required Minimum Distribution. Officially it is called a Qualified Charitable Distribution or QCD. Those who took advantage of it in previous years will be glad it is back.

Even better, the PATH act is now permanent. In the past, Congress has only approved the measure in 1- or 2-year increments, which has made it difficult to plan for the future.

Some people have wondered what the difference is between making a QCD directly to a charity or taking the money and then donating it to the charity personally. The main difference is that a QCD does not increase your income on your tax return (AGI). This may not sound like a big deal, but the implications can be large.

By not increasing your income you may reduce or possibly avoid paying taxes on Social Security. Also, if your income is lower, you may avoid paying the Alternative Minimum Tax (AMT).

To explore this in detail let’s look at an example. Let’s say Henry wants to get the money first and then donate it to a charity. If his required minimum distribution was $10,000 and he withheld $2,000 for taxes, he would get a check for $8,000. Henry would then deposit that check in his checking account and write out a personal check to the charity.

Next year Henry would get to include the $8,000 (not the full $10,000) as a deduction on his taxes. However, his income (AGI) will still be higher by $10,000, which may result in his Social Security being subject to higher taxes and/or his deductions being limited by AMT.

The other option is for Henry to donate the $10,000 directly to a charity. His income (AGI) isn’t increased and he doesn’t have to pay any taxes on the distribution. Also his charity is benefited by the full $10,000. That is an additional $2,000 to charity at no extra cost to Henry! The decision seems to be fairly easy.

If you plan to donate money to a charity and you have to take a Required Minimum Distribution, give us a call so we can help you take full advantage of this reinstated tax law.
Source: http://www.wsj.com/articles/congress-gives-americans-a-tax-gift-for-christmas-1450434600.
Smedley Financial and its advisors do not provide personal tax advice. It is important to coordinate with your tax advisor regarding your situation.

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Year-End Tax Tips

By | 2015, Money Moxie, Newsletter | No Comments

As the end of 2015 approaches, here are some year-end tax tips that may help you save some of your hard-earned money.

Piggy Bank

• Tax harvesting – This is one way to turn a curse into a blessing. If you have an investment with large capital gains that you haven’t wanted to sell for tax reasons, just look to see if you have another non-retirement investment that is underwater. If you sell both investments, you can use the losses in the poor-performing investment to offset the gains of the good performer.

• Lost a job or retired early – You may consider a Roth conversion if your taxable income is low. Low-income years can result in more deductions than taxable income, which means that you may be able to convert part or all of an IRA into a Roth without much tax consequence.

• Roth conversions – If you have been contemplating converting money from an IRA into a Roth for 2015, just remember that the conversion has to take place before the end of the year.

• Watch for approval of Qualified Charitable Distributions (QCD’s) – Congress hasn’t approved QCD’s yet, and they may not this year. They have a history of waiting until the last minute. If congress does approve QCD’s and you are over age 70.5, you can donate part or all of your Required Minimum Distribution to a charity. This donation reduces your taxable income and may mean that less of your Social Security is subject to tax.

 

Smedley Financial and its advisors do not provide personal tax advice. It is important to coordinate with your tax advisor regarding your situation.

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