Well, our “extension season” is behind us (as of Monday the 17th), and we here at Team Pantzis can finally turn our full attention to what’s coming down the pike in 2017.
With the election brewing around us, Congress isn’t doing *anything* right now about tax legislation … so, as usual, there will be some last-minute treats for us by the end of the year in the tax code. But the very good news for you (and all of our Brooklyn tax preparation clients) is that we pay close attention to these things so you don’t have to.
And it’s a good thing we do pay attention. Many of our clients have never received that dreadful notice from the IRS, initiating an audit — or, much worse, the KNOCK on the door! If you never have, you probably don’t keep much financial documentation.
If you have, you are probably terrified to part with a single receipt.
But remember, either way, we’re in your corner.
However, the IRS is one of the few courts where failure to produce proof of your claims results in the assumption that you are guilty of tax fraud.
(This is part of the reason why you ALWAYS want a professional on your side in these matters. Would you go to court without an advocate? Would you go before a court with a software-generated defense? “Your honor, here is my lawyer, Siri.”)
So, during these days of uncertain future, it’s imperative that you are able to protect yourself. And, as great as we are — some of this still does fall in your court. That’s why you must save all the financial documents used to create your tax returns in order to defend yourself in the case of an audit.
And with 2015 returns now firmly in the books, let’s look ahead and ensure that you are handling your records right.
Four Key Recordkeeping Principles For Brooklyn Families To Protect You In The Case Of An Audit
“If you don’t have time to do it right, when will you have time to do it over?” – John Wooden
1.) Firstly (and perhaps this goes without saying), retain a paper copy or receipt of any tax-relevant transaction. Scan these documents and archive them electronically, or acquire them in an electronic format. If the purchase has a manual or warranty, store all the documents in the same electronic and physical location.
Sadly, the IRS has ruled bank or credit card records to be insufficient documentation. As a result, just keep your statements long enough to reconcile your account.
If the purchase was a business or tax-deductible expense, record the expense and why it justifies the deduction. Store this information with or on the receipts.
2.) Second, keep brokerage statements indefinitely for taxable accounts. You are responsible for reporting the cost basis of any security you sell to calculate the capital gains tax. For a mutual fund with 30 years of reinvested dividends, each dividend payment is part of the cost basis. As a result, the cost basis can sometimes be computed only if you have the complete transaction history.
Without knowing the cost basis, the IRS could argue that the entire value of the investment be treated as gain.
If you have lost the record of how much you originally paid for an investment, instead of selling and paying 15% or more of the value in taxes, you can use that investment as part of your charitable giving. Gifting appreciated stock avoids the tax owed and still qualifies for a full deduction. Oddly enough, the IRS still asks for the original purchase date and price for gifted securities, but leaving these blank has no effect on your tax owed.
Many custodians keep several years of electronic copies of brokerage statements available. And they are now required to send any known cost basis electronically when you transfer securities to a new custodian. If your current custodian has the correct cost basis of your securities, you probably no longer need to keep brokerage statements. However, an approach of “better safe than sorry” is always advisable with the IRS.
3.) Third, keep IRA nondeductible contribution records forever. You may need those records every year that you withdraw money in retirement to show that a portion of the withdrawal is not tax deductible.
Or to avoid the hassle, clear out nondeductible IRA contributions by converting all of your IRA accounts to Roth accounts.
4.) Fourth, keep partnership documents, contracts, commission or royalty structures forever. This includes property records, deeds and titles, especially those relating to intellectual property. It also includes any transfers of value for estate planning purposes.
Finally, save all of your tax returns. After you file, save the paper and/or electronic copies with the rest of that year’s financial documents.
Tax returns and all the supporting documentation must be kept at least seven years. The IRS can audit your return for up to three years from your filing date. However, the three-year limit only applies to good-faith errors.
If the IRS suspects you underreported your gross income by 25% or more, they have up to six years to challenge your return. And because you may file for an extension at the October 15 deadline, you must keep your records for at least seven years.
Regardless of those rules, though, if the IRS suspects you filed a fraudulent return, no statute of limitations applies. Because the IRS is run and organized by fallible people (with all of their attendant biases, emotions, etc.), we suggest keeping your tax returns and documents forever.
Unfortunately, whenever the IRS challenges you, the burden of producing evidence that your claims are true rests entirely with you, so you had better have your documentation in order.
Taxpayers collectively spend six billion hours, or 8,758 lifetimes, annually trying to comply with the tax code. Fortunately, as I previously mentioned, YOU don’t have to be the one to do all the heavy lifting. We are on your side…
James Pantzis, CPA, PC
In a few weeks, I intend to post here a look at the tax policies being proposed by each presidential candidate. Much of it is “campaign bluster”, but some of it does show how each of them might affect your wallet, and mine.
In the meantime, there’s a lot of argument and news these days about them releasing their personal tax returns, finding new things that could be hidden, etc. — but it all kind of makes me laugh a little. OF COURSE both Donald Trump and Hillary Clinton used every legal and ethical “loophole” they could possibly use. Sure, one or both of them may have gone beyond those bounds … but the fact remains (and this is something I’ve often said): there are two tax systems in this country:
1) One for those who pay attention and USE the tax code as it’s designed.Poorly-designed as much of it is, it rewards diligence in keeping track of it.
2) Another system for those who use their own software, or “any johnny tax preparer” down the block.
Happily for you, you’re on the better side of that equation.
As a Brooklyn tax professional, it’s my job to help YOU use the tax code well and save you and your family from having to pay too much, or from not receiving your best deal from Uncle Sam.
Speaking of taxes — a few big reminders: October 17th is the deadline to ensure your 2015 (extended) tax return is filed! It’s also the deadline for contributions to self-employed retirement accounts and for a Roth recharacterization.
Finally, moving on to my topic of the week, I thought I’d pipe in on the number one habit I’ve seen in those who eventually grow to be wealthy. It may not (or it may) be what you think, and I’d love to see all of us help our children learn this habit…
James Pantzis’ Key To Raising Rich Kids
“Success is nothing more than a few simple disciplines, practiced every day.” – Jim Rohn
Sadly, too many Brooklyn families neglect a critical aspect of raising children: teaching them to be financially savvy. That said, many clients have written to say that they read and discuss my financial notes at the dinner table with their children. That’s a nice start.
But if you want to raise rich kids who can create and manage wealth, there are a handful of critical rules that are foundational.
Here’s the main one: Postpone spending.
In economics, “deferred consumption” is the very definition of wealth and capital. So … defer your consumption, kids! Everything you don’t spend today is wealth. Only what you don’t spend today is available for investing. And since money makes money, what you don’t spend today can provide a lifetime of income to spend in the coming days.
Teach them this: Wealth is what you save, not what you spend.
Most of the younger generation is under the false impression that wealth is based on the luck of a big salary. Nothing could be further from the truth. According to the now-classic book The Millionaire Next Door by Thomas J. Stanley, the affluent tend to answer ‘yes’ to these three questions:
1.) Were your parents very frugal?
2.) Are you frugal?
3.) Is your spouse more frugal than you are?
So how did they build their wealth? According to Stanley’s research they did it slowly, living well below their means and investing about 20% of their household income each year. And because money makes money, over time, they grew gradually richer and richer.
Imagine you purchase a pair of shoes for $50 every year (obviously, some are more expensive, some are less — the point is the analogy here). The person that makes do with the old ones and only buys shoes every other year will be able to save and invest the difference. After seven years and at a normal interest rate, their savings will be earning enough interest to pay for a new pair of shoes every other year. After eleven years, the interest from the investment will pay for the cost of buying new shoes every year, forever.
Because being frugal early in life produces great wealth later in life.
Due to the seeming wealth of our American culture, it is difficult to learn to distinguish between needs and wants. Very few purchases are “needs”. Other than food, shelter and clothing, everything else is optional. In the United States, we show our extravagance even in these three essentials.
Practically speaking, you can learn to postpone spending one purchase at a time. When our children were very young, we required them to wait one week before spending money on a toy. Often, after waiting a week, they wanted a different toy instead. Then, they had to wait another week for that purchase.
Simply learning to delay and avoid impulse buying can cut your children’s spending in half.
So teach your children: Wait now … profit greatly later.
James Pantzis, CPA, PC
I write these notes on Mondays, and as of today, we don’t yet know what kind of drama (if any) will occur during the presidential debate set for tonight.
But regardless of all the political posturing, we’re all facing so much emotion these days. From the Terence Crutcher shooting, to the unrest in Charlotte, and all over the American map, it still just seems like our wounds are defining us. There are problems needing to be fixed, and it all seems so big.
Perhaps a place that we can all start would be by taking a look in the mirror. And we can pray/pause/consider a little more deeply. Maybe if we start right there first, we will have a better idea of how we can effectively engage in the absolute best way possible.
Moving on to the tax stuff, there’s a new scam making the rounds, and it involves emailing taxpayers a fake notice requesting information about healthcare coverage. This should be the first red flag: The IRS almost never initiates contact with taxpayers by emailing them and attaching their correspondence to an email.
Here’s an example of the fake notice: http://bit.ly/2cytioK
If you receive this scam email, do not respond and do not open the attachment. Forward the email to email@example.com and then delete it.
Dealing with this kind of junk is never fun. And recently, I had an experience that you probably have dealt with as well: challenging a bill that is simply incorrect.
It’s a symptom of our modern world, and if you aren’t keeping a close eye on your credit card statements and the bills that come through your mailbox, it might be too late. But there’s a way to go about it that is almost certain to bring results…
James Pantzis’ Six Steps For Dealing With Errors On Your Credit Card Statements
“Tact is the ability to describe others as they see themselves.” -Abraham Lincoln
Dealing with a billing error can be frustrating. But giving up too quickly will only cost you money. I’ve learned this the hard way, and many of my clients and friends might benefit from what I’ve learned.
So, if you’ve got an erroneous bill to settle, here’s what to do:
1.) Write a polite letter. Control your irritation if you want results. Describe the problem and ask for help. Customer service personnel will be more willing to work with you if you don’t attack them.
2.) Follow the chain of command. Addressing a letter to the CEO of a bank, for example, may only delay a resolution. Start at the bottom, and work your way up until the problem is resolved.
3.) Write within 60 days of receiving the erroneous bill. The Fair Credit Billing Act will protect you only if you follow its limits. That means writing to the company within 60 days after the bill was sent to you.
4.) Give full information. Include your name, address, account number, a brief description of the problem, and copies of the sales slips and other documents that support your claim. Try to keep the letter to a single page.
5.) CC a regulator. If you show that you’re sending a copy of the letter and documents to the Comptroller of the Currency or the Federal Trade Commission, you signal that you mean business.
6.) Confirm delivery. Send the letter by certified mail with return receipt.
Much of what we do around here at Team Pantzis comes down to going to bat on behalf of our clients and making sure that they aren’t getting taken to the cleaners. The above is just a few points from our methodology.
The best advice? Have a professional in your corner.
James Pantzis, CPA, PC
With the recent bombings in New York and New Jersey, the nation seems (once again) to be on edge, and the news channels are (once again) analyzing non-stop the ramifications of it all, what should have been done, what could be done, etc. Fear can run rampant within us if we don’t guard our mind.
I’ll leave the analysis to others, when it comes to how best to secure against these kinds of attacks, and stay in my lane as the person who gets to help you secure against different kinds of dangers (of the financial and taxation kind).
And we pray that justice is done, and the perpetrators of this terroristic garbage are dealt with properly.
In the meantime, let’s do what *we* can do to shore up against those other kinds of thieves I mentioned, about which I have some thoughts today.
But before I get there, a couple reminders:
1) October 17th is the due date for extensions. Less than a month out, so let’s make sure everything on your end is handled. If we’re waiting on you, get your information to us ASAP.
2) That day (10/17) is also the deadline to fund a SEP-IRA or solo 401(k) for tax year 2015 if you requested an automatic extension of time to file. It’s also the deadline for “recharacterizing” a Roth IRA that you converted from a traditional IRA, back to the traditional format for tax purposes. If you converted one this year, we can take a look at whether it might make sense to undo that conversion.
Now, back to financial security. I’ve written in the past about personal online security, but keeping your affairs secure involves more than simply not falling for online scams. Here’s what I mean (and it’s short and sweet) …
Seven Free Tips For Identity Theft Protection For Brooklyn Individuals & Families
“Not until the pain of the same is greater than the pain of change will you embrace change.” -Dave Ramsey
Yes, commonly-advertised identity theft protection services for regular Brooklyn families can seem like an easy button. But the problem is that many of these products are unnecessary or ineffective, or they duplicate things you can do yourself — for free.
Here are some basic things you can set into place right now, which will cover you in the vast majority of circumstances:
1) Please don’t carry your SSN in your wallet. Ever.
2) Don’t post your full DOB on your social profiles. If you really like the messages on your wall for your birthday, just take out the year at least. (Besides, it makes you more mysterious.)
3) Don’t check your bank balances on public wi-fi.
Even if you do it on a secure connection, hacker programs to “snift” your info are as commonly-accessible as pirated video on the internet. This includes your mobile phone.
4) Um, don’t let your wallet get stolen.
5) In case it does, keep a photocopy of every important item in there.
(Except cash, of course. That’s, well, against the law.)
6) Check your credit annually.
www.AnnualCreditReport.com is the one where you don’t have to pay for it.
7) Shred important stuff you don’t need — including credit card solicitation offers. In fact, you can stop those solicitation offers for good by going here: www.optoutprescreen.com or calling 888-567-8688. Opting out should stop most offers, and it’s free.
There. I said it would be short, sweet, and full of common sense.
Don’t forget — we’re only a phone call or email away, and our consistent question for you is this: “What more could we do for you, to help?”
James Pantzis, CPA, PC
Lots of important things are happening in the world these days, but based on what I’m seeing in social media, perhaps the thing that people are MOST interested in is the return of NFL and college football.
Perhaps that causes a mere shrug of the shoulders for many, but regardless of how we feel about it, what it DOES signify is that summer is over. Saturdays and Sundays are now full of tailgates and, soon, (in most cities where I have clients) autumn colors.
Around here, we’re investing ourselves in continuing education so that we can take advantage of every available (and ethical) tax move on behalf of our clients, and gearing up for what already promises to be a very full final quarter with our client family.
Our economy is now about *knowledge* … and that’s why I take the time each week to inform YOU about the “real world” steps you should be taking with your family’s finances, and how to be prepared for any circumstance.
Including the upcoming tax season — which, as I’m beginning to realize, will be here sooner than any of us think.
So I’ve put together a simple primer on what you should be pulling together over this quarter. But the BEST way to be prepared is to have a conversation now about a proactive strategy to minimize your tax burden. January through April may be “tax season”, but September-October is “tax planning season” — and to that end, I suggest you call us ((718) 858-9864) and set up a time for a tax planning session.
But regardless, here’s what you need to be making sure you have ready for 2017 …
James Pantzis’ Tax Planning Strategy For 2016
“It always seems impossible until it’s done.” -Nelson Mandela
Believe it or not, now is the time to start making sure that you’ll be ready for a few months from now, when 2016 tax time is upon us.
Generally speaking, you should keep any and all documents that may have an impact on your federal tax return. Individual Brooklyn taxpayers should usually keep the following records and supporting items on their tax returns for at least three years:
• Bills, Credit card and other receipts
• Invoices, Mileage logs
• Canceled, imaged or substitute checks or any other proof of payment
• Any other records to support deductions or credits you claim on your return.
You should normally keep records relating to property until at least three years after you sell or otherwise dispose of the property. Examples include…
• A home purchase or improvement
• Stocks and other investments
• IRA transactions
• Rental property records
Health insurance verification
The IRS will be sending out “information returns” (form 1095) before the end of January (presumably) that should cover your documentation … but as with everything in dealing with the IRS, it’s a good idea to be armed with your own documentation as well, which would include insurance cards, EOB forms, statements from your insurer, etc.
If you are a Brooklyn small business owner, you must keep all your employment tax records for at least four years after the tax becomes due or is paid, whichever is later.
Examples of important documents Brooklyn business owners should keep include:
• Gross receipts: Cash register tapes, bank deposit slips, receipt books, invoices, credit card charge slips and Forms 1099-MISC
• Proof of purchases: Canceled checks, cash register tape receipts, credit card sales slips and invoices
• Expense documents: Canceled checks, cash register tapes, account statements, credit card sales slips, invoices and petty cash slips for small cash payments
• Documents to verify your assets: Purchase and sales invoices, real estate closing statements and canceled checks
Here’s the best part of all of this: By pulling together this information NOW, we can really work our “magic” and ensure that we aren’t simply playing catch-up for you after the fact. That’s what tax planning is all about.
So give us a call this week, and let’s plan out the rest of 2016 and beyond.
James Pantzis, CPA, PC
How was your long weekend? Look — whatever your opinion about labor unions, I think we all appreciate an extra “day off” now and then (though, as with many Brooklyn business owners, my “day off” wasn’t exactly just burgers and the pool … we’re working hard on getting ready for tax season around here).
Because, as you probably heard sometime last weekend, the reason we even HAVE a weekend is because of the labor movement.
“Labor Day” originated during the time of 7-day workweeks of 12-hour days, in the late 1800’s, as our country was in the throes of the Industrial Revolution. Times have certainly changed since then — and our economy is no longer driven by the manufacturing jobs of the past.
Some would say that the time of the labor movement has passed, but that’s a debate I’d rather not get into today, if that’s okay. 🙂
But although we’ve made so many strides in the last century when it comes to “quality of life” standards, it still doesn’t seem that many people are much happier.
My contention is that they’re probably not spending their money in a way that helps them. And it’s not just me saying so: it’s science.
Here’s what I mean…
James Pantzis’ Six Tips On Money Happiness & The Science Of Spending
“The art of living is more like wrestling than dancing.” -Marcus Aurelius
It’s an old cliche, and people still think it’s true that “money can’t buy happiness” … but that’s not what science has been recently telling us. From a recent study (my emphasis):
We report an analysis of more than 450,000 responses to the Gallup-Healthways Well-Being Index, a daily survey of 1,000 US residents conducted by the Gallup Organization. […] When plotted against log income, life evaluation rises steadily. Emotional well-being also rises with log income, but there is no further progress beyond an annual income of ~$75,000. For reference, the federal poverty level for a family of four is currently $23,050.Once you reach a little over 3 times the poverty level in income, you’ve achieved peak happiness, at least as far as money alone can reasonably get you.
More and more scientists are approaching this topic of finance and happiness, and many of their studies reflect this same reality. Essentially, once you have “enough” to secure food, shelter, security and a little bit more … having MORE money doesn’t actually seem to do much for your happiness quotient.
But there is an emerging trend that is telling us that the happiness/money ratio depends far more on how you spend than it does on how much you have.
The relevant research is summarized in a recent study in the Journal of Consumer Psychology by a quartet of Harvard researchers: “If money doesn’t make you happy, then you probably aren’t spending it right.” (July 2011, available online atwww.ScienceDirect.com )
Most people don’t know the basic scientific facts about happiness — about what brings it and what sustains it — and so they don’t know how to use their money to get it. It is not surprising when wealthy people who know nothing about wine end up with cellars that aren’t much better stocked than their neighbors’, and it shouldn’t be surprising when wealthy people who know nothing about happiness end up with lives that aren’t that much happier than anyone else’s. Money is a chance for happiness, but it is an opportunity that people routinely squander because the things they think will make them happy often don’t.
What is, then, the science of money happiness? I’ll summarize the basic seven points as best I can, but checking out the paper itself will add to it, with citations, etc.
1. Purchase experiences, not things.
Things get old. Things become ordinary. But experiences are totally unique; they shine like diamonds in your memory, often more brightly every year, and they can be shared forever. Whenever possible, spend money on experiences such as taking your family to Disney World, rather than things like a new television.
2. Stop spending so much on yourself
Anything we can do with money to create deeper connections with others tends to tighten our social connections and reinforce positive feelings about ourselves and others. Imagine ways you can spend some part of your money to help others — even in a very small way — and integrate that into your regular spending habits.
3. Go after lots of small pleasures instead of a couple bigger ones
Because we adapt so readily to change, the most effective use of your money is to bring frequent change. Break up large purchases, when possible, into smaller ones over time so that you can savor the entire experience. When it comes to happiness, frequency is more important than intensity. Embrace the idea that lots of small, pleasurable purchases are actually more effective than a single giant one.
4. Pay now and consume later
Immediate gratification can lead you to make purchases you can’t afford, or may not even truly want. Impulse buying also deprives you of the distance necessary to make reasoned decisions. It eliminates any sense of anticipation, which is a strong source of happiness. For maximum happiness, savor (maybe even prolong!) the uncertainty of deciding whether to buy, what to buy, and the time waiting for the object of your desire to arrive.
5. Consider the details more
We tend to gloss over details when considering future purchases, but research shows that our happiness (or unhappiness) largely lies in exactly those tiny details we aren’t thinking about. Before making a major purchase, consider the mechanics and logistics of owning this thing, and where your actual time will be spent once you own it. Try to imagine a typical day in your life, in some detail, hour by hour: how will it be affected by this purchase?
6. Beware of comparison shopping
Comparison shopping focuses us on attributes of products that arbitrarily distinguish one product from another, but have nothing to do with how much we’ll enjoy the purchase. They emphasize things we care about while shopping, but not necessarily what we’ll care about when actually using what we just bought. In other words, getting a great deal on cheap chocolate for $2 may not matter if it’s not fun to eat.
Happiness is a lot harder to come by than money. So when you do spend money, keep these lessons in mind to maximize what happiness it can buy for you. And remember: it’s science.
James Pantzis, CPA, PC
There are people on social media who are already posting hopeful pictures about “Harvest Time” and “Fall 2016”, and I think it might be because this summer has been a really hard one for the nation, and our world. We’ve had terrorist attacks, Zika, terrible flooding in multiple states, political turmoil, a very surreal Olympics (though seasoned with wonderful stories).
And the backdrop of it all is an election season that nobody seems very happy about on either side.
No wonder so many people want to turn the page to a new season as soon as possible.
One of the harbingers of fall is the beginning of school. Parents everywhere are rejoicing (with a healthy seasoning of the bittersweet in realizing again that the kids keep getting older!), and the school buses are starting to get busy around here.
And perhaps naturally, the federal and state governments are interested in our citizenry becoming more educated, and there are a variety of resources and regulations out there that I wanted to let you know about.
By no means is this an exhaustive rundown!
There are goodies in here both for current students, past students and even as well for prospective students (of the child and adult variety). Let me know if we can help in any specific way possible — we’re here for you!
An Overview Of Student Tax Credits, Benefits & Deductions By James Pantzis
“The difficulty in life is the choice.” -George A. Moore
As I mentioned above, this isn’t intended to be a fully-exhaustive list, but there are a bunch of resources for students that many of my clients and friends may not realize are available to them — and I’d like to make sure you know about them!
For Current Students
I’ll address student loans in a minute, but first let’s examine the three big tax-related benefits for current students. There are two major credits, and one major deduction. Again, this is a basic rundown, and for the sake of brevity I’m not including EVERY particular rule for each of these, just the major ones.
The Lifetime Learning Credit (LLC)
Originally passed back in 1997, this is a $2,000 credit towards qualifying college expenses that can be claimed once per tax return. Like most tax credits, with student tax credits there are income phaseouts and limits (which is why we’ll want to be smart about how and when it’s used), but the greatest benefit of it is that there is no time limit on claiming it and you only need to have taken one college course to take the credit.
The American Opportunity Credit (AOC)
This came to us as recently as 2009, as part of the original stimulus package (remember that?), and it offers up to $2,500 for each student. The income phaseouts are higher than the LLC, and it can be used for expenses beyond just tuition (like books). Also, 40% of it is refundable which means you can receive money back from Uncle Sam, even if you didn’t pay any tax! There are other restrictions, but these are the main ones.
Tuition and Fees Deduction
No fancy acronym for this one, as it’s a pretty standard one. Generally, credits are more powerful than deductions, as this one simply reduces the “income” number with which your actual tax is computed (as opposed to a credit which reduces the actual tax). But it gives up to a $4,000 deduction against tuition and qualifying fees.
There are advantages and disadvantages for each of these provisions, and you CAN take all three on one tax return — but they would have to be for a different student (no double-dipping). As usual, we’re here to help with these. In many cases, we’re already doing the thinking for you on them!
For Past Students
This can also apply for current students, but let’s briefly address student loans. As the cost of a college education continues to climb, more and more students are taking on student debt. Collectively, as a country, we currently owe nearly $1.4 trillion in student loans. That balance is growing at a rate of $2,726.27 every second.
“Good” news is that the interest is deductible. Even if you don’t itemize, you can claim up to $2,500 deducted from your income when paying interest on student loans. Generally, your lender keeps track of this for you and you’ll get a form if you paid more than $600 over the course of the year. And, of course, there are other rules (related to if you are claimed as a dependent, income phaseouts, etc.). But again, this is what we are here for!
For Prospective Students
You can take into account the above tax benefits when making your decision, as well as avail yourself of the many (many) scholarships and grants available to you.
One option that may be available to you if you work for a large company is that some of them offer Educational Assistance programs, and you can receive up to $5,250 worth of benefits from an employer to pay for schooling (as long as it is “career related” or towards a specific degree). Anything above that amount would need to be recorded as income.
I hope all of this wasn’t mind-numbingly dull. It’s fun for us here at Team Pantzis to think about the strategic ways to use all this stuff to save our clients on their taxes.
But we also realize that many of our clients simply want us to handle it all for them. We love that … but we also wanted to make sure you knew what was out there.
I hope this helps — and bring on the Fall!
James Pantzis, CPA, PC
A couple things need to be said before I get into the meat of what I’m writing today.
Firstly, our thoughts and prayers are with the residents of Louisiana and the Gulf Coast who withstood 7 trillion gallons of rain in just one week, and this disaster is shaping up to be extremely significant.
As usual, the best way we can help is to make cash donations to trusted organizations — as in many tragedies, scum-sucking scammers quickly poke their heads out of the mud and try to use our heartbreak to line their own pockets. There are many great organizations, obviously, but here is a page for the Salvation Army’s special relief fund.
Secondly (and speaking of scammers), back-to-school season is upon us all, and the IRS has issued new warnings about how many people are being hassled for what is being called a “federal student tax”. There is no such thing. Don’t fall for it.
As a reminder, the IRS has already told us that they will NOT:
- Call to demand immediate payment over the phone, nor will the agency call about taxes owed without first having mailed you several bills.
- Call or email you to verify your identity by asking for personal and financial information.
- Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
- Require you to use a specific payment method for your taxes, such as a prepaid debit card.
- Ask for credit or debit card numbers over the phone or email.
- Threaten to immediately bring in local police or other law-enforcement groups to have you arrested for not paying.
So if you ever receive such a call or communication (and especially if you do not owe tax), don’t engage with the scammer and do NOT give out any information. Just hang up.
Lastly, with the Olympics in our rearview mirror, there’s been lots of angry talk about Olympians getting taxed for their medals. And, as is always a good policy, it’s a good idea to check Snopes about that.
Now, while earning a cash bonus from the United States Olympic Committee might not work as a “side income” for all of my clients, I do get asked from time to time if I have ideas for what might help earn some additional spending money, so I’ve put together some ideas here for a possible “side hustle”…
James Pantzis’ Five Ideas For Establishing A Side Hustle
“Defeat is not the worst of failures. Not to have tried is the true failure.” -George Edward Woodberry
Continued economic uncertainty (especially with so much political turmoil) has brought clients to me who are looking for ways to “trim the fat” … and so, to continue the metaphor, how about *adding* some “lean”?
You see, when trying to save money, eventually you’ll come to a point where you have cut as many expenses as you can and there are no additional steps you can take to free up money from your current income. The next step to saving more could be to look for other sources of income. These are a few common ways to make extra income with which I’ve seen many clients succeed:
* One of the most obvious has to be getting a second job. While this can eat into your free time, it’s an immediate way to bring in a dependable, set amount of income. You could try to make it more enjoyable by choosing something you’re interested in. For example, if you are an avid golfer, then work in a golf store. Not only will you enjoy the job more, you may have a discount that will benefit you as much as the pay check.
* When you invest in dividend paying stocks, you can receive 3-6% annually in dividends from some of the top financial and utility stocks.
* Rental property can be a great form of income, as long as it’s “cash flow positive” — meaning that the rent you bring in more than covers all the expenses. You don’t want your only hope of making money to rest upon the future value of the property. With the exception of the occasional real estate bubble, the actual appreciation on a house makes a terrible investment, believe it or not.
* Sell things around the house that you don’t use anymore. This could be done with a garage sale (often more hassle than it’s worth) or more efficiently online on eBay or Craigslist. If you get comfortable with selling on these sites, you could even buy things at other garage sales or wholesaling sites that are undervalued and sell them online yourself. If you enjoy a certain hobby, like crafts or woodwork, you might be able to make something that you can then sell online on Etsy or other similar sites.
* If you have “freelance” skills, a great site to find work is www.upwork.com.
While not all of these ideas will make a lot of money, even bringing in an extra $100 a month to invest and earn 7% will give you extra savings of around $117,000 in 30 years. And I like the sound of that for you.
I hope this helps.
James Pantzis, CPA, PC
Despite what they’re saying about the low TV ratings for these Olympics, almost everyone I know is talking about them. Michael Phelps, Simone Biles, Simone Manuel, Usain Bolt … the great stories are flying at us so fast that it’s almost hard to keep track. I’m so grateful for the streaming options this year so we don’t have to miss any of them! (Actually, that’s probably a big reason for the lower TV ratings, as I consider it.)
As viewers, we only get this tiny little window into the lives and motivations of these Olympians. It’s sometimes hard to remember how much hard work, determination and practice went into these athletic feats (well, except for when the Procter & Gamble commercials remind us about it).
And of course, we remember that however incredible these moments are, the most important story of our lives is what will be played out in the hidden, quiet moments that are only seen by those who love us most. However many gold medals Michael Phelps has in his trophy case, I imagine that none of them are as precious to him as his son, Boomer.
And we “get” that around here — life is much more than the big, loud moments, and all of it is worth protecting. It’s the story of a long road, and every twist is unique.
But that aside, there are some useful guidelines that you can use to evaluate how you’re proceeding, and whether the financial road you’re traveling on is taking you where you want to go.
Every one of my clients will find themselves in one of the following categories, and I have ideas for what you should be accomplishing in each. If you want to figure out how you can do a better job of any of this, this is also what we are here for. So don’t hesitate to email me or shoot us a phone call at: (718) 858-9864.
We’re here for you.
James Pantzis’ Financial Goals By Age Bracket
“The young man knows the rules, but the old man knows the exceptions.” -Oliver Wendell Holmes, Sr.
Making your money last long enough is a lifetime’s work. And there are some basic “rules” that we can all follow, depending on what stage of life in which we find ourselves.
However, it’s also useful to remember what Mr. Wendell Holmes, Sr. said up there beneath my article title: sometimes rules are best ignored.
Which is why we are here — to help you determine if you are breaking these rules WISELY … or if, perhaps, a refocusing of priorities should be in order.
Regardless, I offer you these financial goals everyone should consider:
Learn to invest, and start putting some money into a retirement account.
Keep planning for retirement. If possible, buy a house. Start saving for your kids’ college.
While still saving money, spend some of it to enjoy life. Talk to your parents about their finances to avoid unpleasant surprises as they grow older.
Analyze your retirement plans to make sure you’ll have enough money to retire. Adjust your saving strategy if necessary.
Start collecting Social Security. Take advantage of senior discounts. Put aside some of your savings for long-term medical needs.
Analyze your spending. Talk to your adult children about your financial situation.
80 and up:
Make sure your will is (continually) up to date. Start earmarking possessions for your children, or handing off family heirlooms outright. Spend your money on items that help you enjoy your life and keep you healthy and safe.
Again, every life has its exceptions … but I do hope that you’ve thought yours through. To your family’s financial health!
James Pantzis, CPA, PC
I’ve recently witnessed some child tantrums in the checkout line.
You know how it goes … many people looking away, some looking on with scowls of judgment and a few kind souls giving smiles and words of encouragement.
Parenting is no walk in the park.
Many parents face a unique tension when it comes to loving and providing for their children … and balancing it with the desire to keep them grounded. It is so hard. So, in the interest of throwing some ideas out there, I thought I’d weigh in with a few concepts that might spark ideas for instilling financial smarts into our children (and the ability to understand that they don’t get everything they want right away).
I know — this isn’t a normal topic for a tax professional to address.
But we see it as our role to come alongside families and individuals where the rubber meets the road: how taxes and money actually affect our daily lives. I happen to think it’s part of what makes us effective … because we care about ALL of the implications for your financial decisions.
I know that every family has its own rhythm and pattern, and I’m no “parenting expert”. It’s risky for me to even write about this stuff! But I hope you understand — these are ideas to spark your thinking. Do with them what you will.
[And before I get to them, let me also emphasize that we are here for you year-round. With school right around the corner for many of our clients, there are a slew ofschool-related tax deductions we could explore for you. Let us know how we can help, by dropping me a note or calling: (718) 858-9864 ]
Children, Finances And Brooklyn’s Consumerism Culture
“Patience is the companion of wisdom.” -Saint Augustine
I should probably start this right off by saying that I’m not claiming to be a particular expert in these matters. However, I do watch what other people do well … and I’ve had many conversations with wise clients who have shared a thing or two over the years. I have clients with great material means, who have children that remain “unspoiled”, and who don’t carry an expectant spirit.
Likewise, I have clients who have shared their struggles with us about their children always wanting MORE MORE! (these are brave and wonderful clients to share such private details), and this can even be the case when some of these families don’t have large incomes.
And then there are the holidays — in about four months and coming faster than we all think. And I also have some clients whose children get “back to school” gifts (whether at home or from classmates), and of course the normal decisions about birthday gifts.
So how do we hold back a flood of consumerism, and teach our children the true meaning of gifts, giving and the upcoming holiday season? Well, some of my wiser clients might say …
Explicitly Limit The Number Of Gifts Given
Parents often tend to go overboard buying presents for their little ones around birthdays and holidays — after all, it often feels like an overflow of love AND children sure do love it.
But I know Brooklyn families who have always put a stated limit on Christmas and birthday presents — and yet their children don’t seem to act like they feel deprived. Christians can link Christmas gift-giving to the three gifts of the magi; Jewish believers can connect their celebration to the miracle of the oil and others can find different reasons (spiritual or otherwise) to not simply pour a truckload of gifts on their children. The key seems to be in creating a happy atmosphere around it, and remaining consistent.
And because I’m writing this months in advance, you have time to be thoughtful about it, and perhaps prepare your children differently, if you hope to make a shift.
Have Your Children Buy Their Friends Gifts
Why not let your kids experience what it feels like to sacrifice and give? After all, we’d all want to give ALL of our friends a gift, but the truth of the matter is that we simply cannot buy a gift for everyone on our list. We have finite resources and have to allocate them accordingly. There is a line that we all have to draw in the sand for who will get gifts and who will get a card.
Giving your children a certain dollar amount to spend on gifts, or simply making them pay for their friends’ gifts out of their own pocket, will teach them about making the hard choices of whom to give to, and how much, within their very limited resources.
And, of course, this assumes that they ARE giving gifts! If not, that’s a great place to start.
Share Financial Details With Your Children
Children should be protected from adult concerns. But that doesn’t mean that they should be blissfully ignorant about how money works. In fact, we owe it to our children to properly explain where the family’s money comes from, how it gets into the bank account, and how expenses and budgets work. With a little explanation about how your family’s budget is structured, you may be able to hold back the tide of consumerism culture.
Again, they don’t need to feel a pinch — but they SHOULD know that gifts and items have a monetary value, and don’t just get plucked from the shelves without cost.
These are just ideas to start with. It’s extremely hard to curb the allure of consumerism in our culture. But in my opinion, it’s a fight that every Brooklyn parent should consider waging in today’s society of overspending and consumer debt.
Again, every family has their own approach … but I do hope that you’ve thought yours through. To your family’s financial health!
James Pantzis, CPA, PC