Top 6 Action Items for the New Year

Posted on December 10, 2024 by FCA Admin

As 2008 draws to a close, many are hopeful for significant changes in 2009.  Among these is a better economic outlook.  But what can you do now to make way for a better economic outlook?

 

    1. Keep enough cash available.  I can’t stress this enough.  This year has been a record year for layoffs.  Even if you’re not in danger of losing your job, it is still imperative to keep enough cash on hand.  Financial experts recommend having enough cash on hand to cover between 6 and 9 months of living expenses. 

    1. Diversify your investment portfolio. In order to have a well diversified investment portfolio, it is critical that one purchase stock in both U.S. and international companies.   Another way to diversity is to purchase investments in large and small companies or fixed income and stocks.  A financial advisor can show you how to properly diversity your investments.

    1. Continue to live below your means.  This one is self explanatory. At least I hope it is.  Living below your means does not mean depriving yourself of the good things in life.  It basically encompasses making wiser choices about everyday purchases.  It’s about distinguishing between wants and needs.

    1. Pay off expensive debts.  Basically what this means is paying off those high interest rate credit cards.  If you’re having difficulty, your accountant or financial advisor can assist you with coming up with a plan.  Another option is to contact the credit card company directly and ask them to lower your interest rate.

    1. Review your credit report. This is a high priority especially if you are considering refinancing your mortgage.  Mortgage rates are at an all time low.  Even if you are not planning on refinancing, reviewing your credit report on a quarterly or annual basis is a good habit to create.  Check out www.annualcreditreport.com for more information on how to obtain a free copy of your credit report.

  1. Create a budget and stick to it. Even though I listed this topic last, it does not mean that it is the least important.  As I mentioned in a previous blog, budgets build discipline.  I always encourage everyone to create one.  Not only will you see where your money is going, you will also see how much you have left for savings.  If you need help creating and sticking to a budget, be sure to reach out to your accountant or financial professional.

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Important tips if you’re recently married

Posted on November 7, 2024 by FCA Admin

If you are recently married or planning to get married, be sure to notify the appropriate agencies. This will ensure that there are no complications come tax season.

  • The IRS – Form 8822 should be completed if you have a new address. The form is available online at IRS.gov.

 

  •  Social Security Administration– Form SS-5, Application for a Social Security card should be completed if your name has changed.  The form is available on SSA’s web site at www.socialsecurity.gov,

 

  • The U.S. Postal Service– The U.S. Postal Service should be notified so that your mail will be sent to the correct location. Change of address can be done online at www.usps.com

 

  • Inform your Employer– Your employer should be aware of your name and address change so that your Form W-2 is correct and updated.   Contact the Human Resources Department to ensure that your information is updated.

 

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Check up on your charity

Posted on October 10, 2024 by FCA Admin

 

 

These days you may receive several calls or mailings for making charitable donations.  Of course we all want to help out.  Money is very tight in this economy and no one wants to feel that they are being taken for a ride.  But how do you ensure that you are making a donation to a reputable charity?   Follow these simple tips and you will be on the path to making a wise decision:

 

  • Check to ensure that the charity is a tax exempt non-profit.  Use IRS Publication 78 to check the status of the charity before you donate.  Publication 78 is available at the IRS website and is always up to date.  http://www.irs.gov/charities/article/0,,id=96136,00.html
  • Use Charity Navigator to check the purpose and financials of your chosen charity.  Charity Navigator is available at www.charitynavigator.org.
  • Lastly, review the charity’s Form 990, Return of Organization Exempt from Income Tax. This form is required to be filed to the IRS yearly by tax exempt non-profits.  Additionally, this form is required to be posted on a non–profits website or made readily available to the public. The 990 will list the amount of income earned and expenses incurred.

With these few simple tips, you are on your way to making a wise decision with your charitable dollars.

 

 

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To transfer or not to transfer

Posted on September 10, 2024 by FCA Admin

Credit card balance transfers are very common.  We usually think we are getting a good deal if we are offered a zero percent APR balance transfer.  This is a great offer.  However, too often we fail to think about the long term effects of a credit card balance transfer.

For example, can you avoid incurring new charges on the old card?  For many people this is a difficult task.  Additionally, what do you plan to do with the old card?  It is recommended that you keep the account open.  This helps build up your FICO score.

Other important factors to consider are whether you will get approved for the new card.  Applying is the easy part. However, the challenge is getting the approval in the first place.  Lastly, be sure to consider fees that will be incurred as a result of the balance transfer.  Most if not all major credit card companies charge fees for balance transfers.

For more useful information on credit cards and balance transfers, visit the bankrate.com website and search on credit cards.

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Don’t let credit card debt get you down

Posted on August 10, 2024 by FCA Admin

So you have a lot of credit card debt?  So what now?  Many people find themselves in this situation and feel helpless and hopeless.  The key is to not give up.  There are many resources out there to help you. Among them are:

 

  • Credit counseling: There are several nonprofit agencies out there dedicated to helping you.  Do not fall for those agencies that are asking you to pay up front.  The real agencies will not charge for their services.

 

  • Consolidation loan: This technique has been useful for many people. Consolidation loans can be obtained through many resources.  Check with your local bank or consider peer to peer lending.

 

  • Debt settlement: Consider contacting your credit card company and negotiate to settle your debt for a lower amount.  For example, try to settle half of your debt.  You can accomplish this by calling or writing to your credit card company.  Explain the situation to them and see if they are willing to negotiate and settle a portion of your debt.

 

  • Pay off your high interest cards: Prioritize your debt so that you are paying off your high-interest credit cards first. This will take some practice.  Be sure to take into account all of the debt that you owe so that you can come up with the right strategy.

 

 

For more useful information on credit cards and balance transfers, visit the bankrate.com website and search on credit cards.

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Get it in writing.

Posted on July 31, 2024 by FCA Admin

 

Many people are now borrowing from family and friends due to the current economic crisis.   This new phenomenon known as social lending has increased significantly over the past year. However, many fail to document the loan.  This in turn leads to disputes later on regarding the money borrowed.   Experts now recommend using a third party intermediary that specializes in managing social loans.  One of these companies is Virgin Money USA http://www.virginmoneyus.com/.

The company makes it easy and affordable to facilitate the transaction.  This will save many the heart ache and headache associated with lending money to friends and family.  Here’s how it works:

·         Find someone that you would like to borrow money from and create a proposal.

·         Make contact with Virgin money to manage the loan.

·         Select interest rate and repayment terms.

Another good reason to use a service such as Virgin Money is that the company follows up and takes immediate action if the borrower is delinquent.  

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IRS Can Help When Starting a Small Business

Posted on June 22, 2024 by FCA Admin

If you are opening a new business this summer, the IRS has some basic federal tax information to help you get started.

Here are some things to consider when starting a business:

  • Type of Business One of the first decisions you need to make is what type of business you are going to establish. The most common types of businesses are sole proprietorship, partnership, corporation, S corporation, and Limited Liability Company. The type of business you establish determines which tax forms you will need to file.
  • Types of Taxes The type of business you operate also determines what types of taxes you will pay and how you will pay them. The four general types of business taxes are income tax, self-employment tax, employment tax and excise tax.
  • Employer Identification Number A business typically needs to get an Employer Identification Number to use as an identifier for tax purposes. Check IRS.gov to find out whether you will need this number, and, if so, you can apply for an EIN online.
  • Recordkeeping Good records will help you keep track of deductible expenses, prepare your tax returns and support items that you report on your tax returns. Good records will also help you monitor the progress of your business and prepare your financial statements. You may choose any recordkeeping system that clearly shows your income and expenses.
  • Tax Year  Every business taxpayer must figure taxable income on an annual basis called a tax year. Your tax year can be either a calendar year or a fiscal year.
  • Accounting Method  Each taxpayer must also use a consistent accounting method, which is a set of rules for determining when to report income and expenses. The most commonly used accounting methods are the cash method and accrual method. Under the cash method, you generally report income in the tax year you receive it and deduct expenses in the tax year you pay them. Under an accrual method, you generally report income in the tax year you earn it and deduct expenses in the tax year you incur them.

Visit the IRS.gov website and click on the ‘Businesses’ tab for more information and resources, including a special section on starting a business. Publication 583, Starting a Business and Keeping Records, can also help new business owners understand their federal tax responsibilities. The publication is also available on IRS.gov or by calling 800-TAX-FORM (800-829-3676). 
Links:

YouTube Video:

  • Employer Identification Number – English

Note. From Issue Number: IRS Tax Tip 2012-11. Copyright 2013 by Copyright Holder. Reprinted with permission.

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Avoiding an IRS Audit

Posted on May 24, 2024 by FCA Admin

No one wants to be audited by the IRS.  It is embarrassing and also draining emotionally.  It makes many people uncomfortable because it implies that you did something wrong.  But just because you are audited doesn’t mean that you did something wrong.  The IRS randomly picks who it audits.  Some individuals are more likely to be audited than others.  For example, self employed, high income filers, and workers with cash income are more likely to be audited.

So what can you do to avoid an audit or protect yourself if selected for an audit?

  • Be honest when completing your return: Don’t lie about how much money you made.
  • Keep all receipts: IRS Publication 552, Recordkeeping for Individuals  is a good source on the length of time to keep records.
  • File your return on time: Be mindful of the due date for filing and file on time and as soon as possible.
  1. Know your rights as a taxpayer: IRS Publication 1, Your Rights as a Taxpayer is a good reference for all taxpayers to read.

In summary, be smart, know your rights, keep proper records and you will be well prepared in the event of an audit.

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Give Tax Records a Mid-Year Tune-up this Summer

Posted on April 24, 2024 by FCA Admin

Issue Number:    Summertime Tax Tip 2013-23

Inside This Issue

During the summer, you may not think about doing your taxes, but maybe you should. Some of the expenses you’ve paid over the past few months might qualify for money-saving tax credits or deductions come tax time. If you organize your tax records now, you’ll make tax filing easier and faster when you do them next year. It also helps reduce the chance that you’ll lose a receipt or statement that you need.

Here are some tips from the IRS on tax recordkeeping.

• You should keep copies of your filed tax returns as part of your tax records. They can help you prepare future tax returns. You’ll also need them if you need to file an amended return.
• You must keep records to support items reported on your tax return. You should keep basic records that relate to your federal tax return for at least three years. Basic records are documents that prove your income and expenses. This includes income information such as Forms W-2 and 1099. It also includes information that supports tax credits or deductions you claimed. This might include sales slips, credit card receipts and other proofs of payment, invoices, cancelled checks, bank statements and mileage logs.
• If you own a home or investment property, you should keep records of your purchases and other records related to those items. You should typically keep these records, including home improvements, at least three years after you have sold or disposed of the property.
• If you own a business, you should keep records that show total receipts, proof of purchases of business expenses and assets. These may include cash register tapes, bank deposit slips, receipt books, purchase and sales invoices. Also include credit card receipts, sales slips, canceled checks, account statements and petty cash slips. Electronic records can include databases, saved files, emails, instant messages, faxes and voice messages.
• If you own a business with employees, you should generally keep all employment-related tax records for at least four years after the tax is due, or after the tax is paid, whichever is later.
• The IRS doesn’t require any special method to keep records, but it’s a good idea to keep them organized and in one place. This will make it easier for you to prepare and file a complete and accurate return. You’ll also be better able to respond if there are questions about your tax return after you file.

You’ll find more information about recordkeeping for individuals in Publication 17, Your Federal Income Tax. Business owners should check Publication 583, Starting a Business and Keeping Records. Both are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676). Video and audio files explaining recordkeeping requirements are also available on our IRS video portal at www.irsvideos.gov.

Additional IRS Resources:
• Publication 17, Your Federal Income Tax 
• Tax Topic 305 – Recordkeeping
• Publication 583, Starting a Business and Keeping Records IRS

 

Note. From Issue Number: IRS Tax Tip 2013-23. Copyright 2013 by Copyright Holder. Reprinted with permission.

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Don’t Overlook the Benefits of Miscellaneous Deductions

Posted on March 5, 2024 by FCA Admin

Issue Number:    IRS Summertime Tax Tip 2012-17

Inside This Issue

If you are able to itemize your deductions on your tax return instead of claiming the standard deduction, you may be able to claim certain miscellaneous deductions. A tax deduction reduces the amount of your taxable income and generally reduces the amount of taxes you may have to pay.

Here are some things you should know about miscellaneous tax deductions:

Deductions Subject to the 2 Percent Limit. You can deduct the amount of certain miscellaneous expenses that exceed 2 percent of your adjusted gross income. Deductions subject to the 2 percent limit include:

  • Unreimbursed employee expenses such as searching for a new job in the same profession, certain work clothes and uniforms, work tools, union dues, and work-related travel and transportation.
  • Tax preparation fees.
  • Other expenses that you pay to: 

– Produce or collect taxable income,
– Manage, conserve, or maintain property held to produce taxable income, or
– Determine, contest, pay, or claim a refund of any tax.

Examples of other expenses include certain investment fees and expenses, some legal fees, hobby expenses that are not more than your hobby income and rental fees for a safe deposit box if it is not used to store jewelry and other personal effects. 

Deductions Not Subject to the 2 Percent Limit.  The list of deductions not subject to the 2 percent limit of adjusted gross income includes:

  • Casualty and theft losses from income-producing property such as damage or theft of stocks, bonds, gold, silver, vacant lots, and works of art.
  • Gambling losses up to the amount of gambling winnings.
  • Impairment-related work expenses of persons with disabilities.
  • Losses from Ponzi-type investment schemes.

Qualified miscellaneous deductions are reported on Schedule A, Itemized Deductions. Keep records of your miscellaneous deductions to make it easier for you to prepare your tax return when the filing season arrives.

There are also many expenses that you cannot deduct such as personal living or family expenses. You can find more information and examples in IRS Publication 529, Miscellaneous Deductions, which is available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Links:

  • Publication 529, Miscellaneous Deductions (PDF)
  • Tax Topic 508 – Miscellaneous Expenses
  • Schedule A Itemized Deductions (PDF)
  • Instructions for Schedule A (PDF)

YouTube Videos:

 

Note. From Issue Number: IRS Tax Tip 2012-17. Copyright 2013 by Copyright Holder. Reprinted with permission.

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