At Walker, Fluke & Sheldon, PLC, we know that an informed client is our best customer. The internet is a great education resource, with endless amounts of information just a click or two away…
But sometimes its nice to have help sorting the virtual noise and clutter, so we’ve selected a few helpful articles for you to view. Check back often, for all the latest information on ways to manage your business and personal financial needs more effectively.
The income tax filing season has begun and important tax documents should be arriving in your mailbox. Even though your return is not due until April, you can make tax time easier on yourself with an early start. Here are the Internal Revenue Service’s top 10 tips to ensure a smooth tax-filing process.
- Gather your records Round up any documents you’ll need when filing your taxes: receipts, canceled checks and other documents that support income or deductions you’re claiming on your return.
- Be on the lookout W-2s and 1099s will be coming soon; you’ll need these to file your tax return.
- Have a question? Use the Interactive Tax Assistant available on the IRS website to find answers to your tax questions about credits, deductions, general filing questions and more.
- Use Free File Let Free File do the hard work for you with brand-name tax software or online fillable forms. It’s available exclusively at www.irs.gov. Everyone can find an option to prepare their tax return and e-file it for free. If you made $57,000 or less, you qualify to use free tax software offered through a private-public partnership with manufacturers. If you made more or are comfortable preparing your own tax return, there’s Free File Fillable Forms, the electronic versions of IRS paper forms. Visit www.irs.gov/freefile to review your options.
- Try IRS e-file IRS e-file is the safe, easy and most common way to file a tax return. Last year, 79 percent of taxpayers – 106 million people – used IRS e-file. Many tax preparers are now required to use e-file. If you owe taxes, you have payment options to file immediately and pay by the tax deadline. Best of all, the IRS issues refunds to 98 percent of electronic filers by direct deposit within 14 days, if there are no problems, and some may be issued in as few as 10 days.
- Consider other filing options There are many options for filing your tax return. You can prepare it yourself or go to a tax preparer. You may be eligible for free face-to-face help at a volunteer site. Give yourself time to weigh all the options and find the one that best suits your needs.
- Consider direct deposit If you elect to have your refund directly deposited into your bank account, you’ll receive it faster than a paper check in the mail.
- Visit the official IRS website often The IRS website at www.irs.gov is a great place to find everything you need to file your tax return: forms, publications, tips, answers to frequently asked questions and updates on tax law changes.
- Remember this number: 17 Check out IRS Publication 17, Your Federal Income Tax, on the IRS website. It’s a comprehensive resource for taxpayers, highlighting everything you’ll need to know when filing your return.
- Review! Review! Review! Don’t rush. We all make mistakes when we rush. Mistakes slow down the processing of your return. Be sure to double check all the Social Security numbers and math calculations on your return as these are the most common errors. Don’t panic! If you run into a problem, remember the IRS is here to help. Start with www.irs.gov.
Technically, almost everything you own and use for personal, pleasure, or investment purposes is a capital asset. Capital assets include, but are not limited to, homes, household furnishings, stocks, bonds, and mutual funds. When a capital asset is sold, the difference between the amount you paid (your basis) and the amount you sold it for is generally a capital gain or loss.
Here are some important facts about capital gains and losses:
- You must report all capital gains on your federal tax return. For most taxpayers, these generally include a primary residence (subject to significant gain exclusions), stocks, bonds, and mutual funds.
- You may deduct capital losses only on investment property (e.g., stocks and mutual funds), not on property held for personal use (e.g., homes and furnishings).
- Capital gains and losses are classified as long-term or short-term, depending on how long you hold the property before you sell it. If you hold it for more than one year, your capital gain or loss is long-term. If you hold it for one year or less, your capital gain or loss is short-term.
- The tax rates that apply to long-term capital gains are generally lower than the tax rates that apply to short-term capital gains and wages.
- If your capital losses exceed your capital gains, the excess can be deducted on your tax return and used to reduce other income, such as wages, up to an annual limit of $3,000, or $1,500 if you are married filing separately.
- If your total net capital loss is more than the annual limit on capital loss deductions, you can carry over the unused part and treat it as if you incurred it in the following year.
The Social Security Administration (SSA) recently announced that Social Security statements may now be viewed online at?www.ssa.gov/mystatement. The statements provide workers with an estimate of benefits under current law and an earnings record with Social Security and Medicare for taxes paid over their working career. A printable version of the Social Security statement is available. To get an online statement, a person must be 18 or older and able to provide information that matches their SSA file. After verification, an account is created with a unique user name and password to access the online statement.
Boomer Alert: Approximately 3 million baby boomers are turning 65 each year. According to the Social Security Administration, social security was the major source of income for most beneficiaries.
Most of us have more than enough to do. We’re on the go from early in the morning until well into the evening – six or seven days a week. Thus, it’s no surprise that we may let some important things slide. We know we need to get to them, but it seems like they can just as easily wait until tomorrow, the next day, or whenever.
A U.S. Supreme Court decision reminds us that sometimes “whenever” never gets here and the results can be tragic. The case involved a $400,000 employer-sponsored retirement account, owned by William, who had named his wife Liv as his beneficiary in 1974 shortly after they married. The couple divorced 20 years later. As part of the divorce decree, Liv waived her rights to benefits under William’s employer-sponsored retirement plans. However, William never got around to changing his beneficiary designation form with his employer.
When William died, Liv was still listed as his beneficiary. So, the plan paid the $400,000 to Liv. William’s estate sued the plan, saying that because of Liv’s waiver in the divorce decree, the funds should have been paid to the estate. The Court disagreed, ruling that the plan documents (which called for the beneficiary to be designated and changed in a specific way) trumped the divorce decree. William’s designation of Liv as his beneficiary was done in the way the plan required; Liv’s waiver was not. Thus, the plan rightfully paid $400,000 to Liv.
The tragic outcome of this case was largely controlled by its unique facts. If the facts had been slightly different (such as the plan allowing a beneficiary to be designated on a document other than the plan’s beneficiary form), the outcome could have been quite different and much less tragic. However, it still would have taken a lot of effort and expense to get there. This leads us to a couple of important points.
The first is that if you want to change the beneficiary for a life insurance policy, retirement plan, IRA, or other benefit, use the plan’s official beneficiary form rather than depending on an indirect method such as a will or divorce decree. The second point is that it’s important to keep your beneficiary designations up to date. Whether it is because of divorce or some other life-changing event, beneficiary designations made years ago can easily become outdated.
One final thought regarding beneficiary designations: while you’re verifying that all of your beneficiary designations are current, make sure you’ve also designated secondary beneficiaries where appropriate.