Spring has officially sprung and we’re working like busy bees on client tax returns these next few weeks before April 15th, and I would like to say: if you have not yet done so, we need to get your information to complete your return as soon as possible.
This has been a very busy season … so as much as you can enable us to do our work on your behalf, the better.
Give us a call: (718) 858-9864 or contact us.
You need someone on your side who can fight for you.
More and more municipalities (states, cities, the federal government) are looking into every corner possible for additional cash, and not just those who are facing bankruptcy.
And one way they do so is to scrutinize … you.
James Pantzis Reveals 6 Common Tax Preparation Mistakes That Could Get You Audited
“What is once well done is done forever.” – Henry David Thoreau
Sometimes clients come to us from other professionals because they have gotten themselves in hot water with the IRS, and they’re facing the withering gaze of the auditors.
We don’t want that to happen for you — so here are 6 common tax preparation mistakes we watch out for when preparing and submitting your tax returns…
1. Indefensible claims
There are so many old wives’ tales saying that certain items trigger an audit: home office deductions, passive losses, schedule C (sole proprietorship) activities, etc. But you really can’t predict the trigger (and you can drive yourself crazy trying), but you *can* adopt the “be reasonable” mantra about every item on your return, including these. So if you don’t have a decent claim for a home office, don’t claim it. If your money-losing sole proprietorship is really more of a fun hobby, treat it as such.
Look–don’t be scared to take deductions and losses you’re entitled to, but don’t take tax positions you aren’t comfortable defending. If you take reasonable tax positions, you’ll likely find you won’t end up needing to defend them. And if you do face an audit, it will likely be far easier.
2. It doesn’t all add up.
This seems like it should go without saying, but make sure you add, subtract and multiply accurately. Check your numbers through each step and do some simple math checks when you finish. If you do make a math mistake, you are likely to get a math correction notice from the IRS. This isn’t an audit. But your goal is to minimize your interaction with the IRS bureaucracy, which, ah… isn’t known for the best mail handling practices.
3. Lost 1099
This can be confusing, because the Form 1099 comes in many varieties, including 1099-INT for interest, 1099-DIV for dividends, 1099-G for tax refunds, 1099-R for pensions and 1099-MISC for miscellaneous income. These forms are sent by payers of such funds to both you and the IRS.
So regardless of how many 1099s you receive, make sure they all are accounted for on your return. There are also Forms 1098 which lenders send (to you and the IRS) recording how much interest you paid. The IRS matches your return against the 1098s and 1099s. So one sure way to guarantee an IRS query is to fail to account for something! If a Form 1099 is wrong–say it reports more income than you had–you can explain or deduct it on the return, but you need to first report it.
4. Suspicious OVER-reporting
I’m not talking about under-reporting income, or holding necessary information back. But you’d be surprised how many professionals and amateurs alike try to submit too much *supporting* information. True, if your return is complex, you may need to add explanations or disclosures in footnotes. Be concise, truthful and accurate, but don’t provide copies of sales agreements, settlement agreements, bank statements, etc., unless you are later asked by the IRS to do so.
Disclosures can be made on regular paper or special IRS forms. A Form 8275 “Disclosure Statement” on plain paper can be used any time you need to disclose something that can’t be adequately disclosed on the forms. Form 8275-R “Regulation Disclosure Statement,” is for disclosing positions that are contrary to IRS Regulations or other authority. You shouldn’t be filing a Form 8275-R–or taking a tax return position that would require it–without professional help.
5. Fighting unnecessary fights.
If you take reasonable tax positions, and complete your return accurately, checking your math, why should you pay a bill if the IRS sends you one?
Frankly, it’s simply a matter of practicality (and wisdom) rather than principle. It just doesn’t pay to fight with the IRS on small matters. So don’t get into the bureaucratic system and risk bigger problems for a few dollars. Just pay it and move on.
6. Ticky-Tack Prior Year Amending
Here’s the reverse situation of my previous point: amended returns are reviewed much more regularly than initial returns. So if you forgot a deduction or otherwise think you can get a small amount back by amending, think twice before amending your return (i.e. — consult with a pro). Consider whether you might have bigger problems if other matters on your return, unrelated to the amendment, are reviewed. Yes, you can win a battle … and lose a larger one.
And a last word: No matter how careful you are to avoid tax preparation mistakes, there’s no way to guarantee you’ll never have a tax controversy. Sometimes your number just comes up.
And if your number is called, well, we’re here to walk with you …
(But we’ll do everything in our power to make sure it’s NOT called!)
James Pantzis, CPA, PC
Brackets, brackets, brackets.
Depending on when you read this, you may have already filled yours out (or it may already be busted!). Billions fly around every year (probably much of it not reported on Form W-2G!), and it’s become a huge part of this season, as you no doubt know.
You know what else is a big part of this season? Unclaimed refunds.
Every year, we get the number from the IRS, and it always hovers around $1B. That’s where it is this year: http://cnnmon.ie/1wQECRl
There’s buckets of the green stuff sitting in accounts, waiting for those unsuspecting non-filers to realize that it’s actually theirs. DEADLINE: April 15.
If you didn’t file taxes in 2011 (i.e., during the spring of 2012), now is your last chance. Allow us to help you do so by either reviewing a prior year’s return which somebody else submitted for you, or by evaluating your financial records if you didn’t actually file a return that year. It’s amazing how many people that is true for.
Lastly, in the interest of having this NOT happen for you, let’s make sure you do it right for THIS year.
In early January, I posted a “checklist”, and it was one of my most popular messages. I guess it was handy. And now is a time when many are finally getting around to this, so I thought I’d share it again.
Putting together this list may run slightly counter to my business goals — after all, we do get paid to do this on behalf of clients! That said, our mission is to ensure that EVERYONE in the local area saves the most possible when the IRS comes calling. Some of these may seem small, but trust me when I say that they add up.
Once Again, James Pantzis’ 2015 Tax Time Document Chase List
“So many fail because they don’t get started; they don’t go.” – W Clement Stone
Yes, this is a long list — but it’s the unfortunate reality of our tax code that it’s not even comprehensive! But these items will cover 95% of our clients. Really, this is for ensuring that we’re able to help you keep every dollar you can keep under our tax code.
Even if for some strange reason you won’t be using our cost-effective services this year, feel free to use this list as a handy guide…
Social Security Numbers (including spouse and children)
Child care provider tax I.D. or Social Security Number
Employment & Income Data
W-2 forms for this year
Tax refunds and unemployment compensation: Form 1099-G
Miscellaneous income including rent: Form 1099-MISC
Partnership and trust income
Pensions and annuities
Jury duty pay
Gambling and lottery winnings
Prizes and awards
Scholarships and fellowships
State and local income tax refunds
Health Insurance Information (New for 2015)
* All 1095-A Forms from marketplace providers (if you purchased insurance through a Marketplace)
* Existing plan information (policy numbers, etc.)
* If claiming an exemption, your unique Exemption Certificate Number
* Records of credits and/or advance payments received from the Premium Tax Credit (if claiming)
Residential address(es) for this year
Mortgage interest: Form 1098
Sale of your home or other real estate: Form 1099-S
Second mortgage interest paid
Real estate taxes paid
Rent paid during tax year
Interest income statements: Form 1099-INT & 1099-OID
Dividend income statements: Form 1099-DIV
Proceeds from broker transactions: Form 1099-B
Retirement plan distribution: Form 1099-R
Capital gains or losses
Auto loans and leases (account numbers and car value) if vehicle used for business
Student loan interest paid
Early withdrawal penalties on CDs and other fixed time deposits
Personal property tax information
Department of Motor Vehicles fees
Gifts to charity (receipts for any single donations of $250 or more)
Unreimbursed expenses related to volunteer work
Unreimbursed expenses related to your job (travel expenses, entertainment, uniforms, union dues, subscriptions)
Education expenses (tuition and fees)
Child care expenses
Medical Savings Accounts
Tax return preparation expenses and fees
Estimated tax vouchers for the current year
Self-employment SEP plans
Self-employed health insurance
K-1s on all partnerships
Receipts or documentation for business-related expenses
State and local income taxes
IRA, Keogh and other retirement plan contributions
Casualty or theft losses
Other miscellaneous deductions
We hope this helps, and we really look forward to seeing you in here in 2015!
James Pantzis, CPA, PC
We’re rolling through a very busy tax season here, and I wanted to pause a minute and make some observations that I think will be useful to you (and, I hope, to many others).
Because it sometimes seems as if the wealthy simply appear into the world that way.
Yes, some are born into money, but that isn’t the case across the board. Many of my wealthy clients have had to work their way up the scale, and to do so, they’ve had to adopt a different set of wealth habits from most other people.
We can learn a lot from them, these among our ranks who had to create the wealth they now enjoy. More precisely, it’s the habits that got them to where they are that we need to focus on and learn from.
I thought I’d take some time to share with you some observations I’ve made as I’ve worked with clients who have done extremely well, financially.
I’m presuming, here, that you’d like to join those ranks … so here are five things which I’ve observed, that I believe will help you get there.
(And a bonus #6, at the end, of course.)
James Pantzis Reveals Five Wealth Habits Only The Wealthy Do
“If you wish to be out front, then act as if you were behind.” – Lao Tzu
As I’ve watched clients go from one end of the income scale to another, over the years, here are five wealth habits I’ve seen carried by all of them who moved *up* that scale (and those who started there — without these, well, they went the other direction) …
1. Putting off today what you can have tomorrow
The wealthy usually carry a willingness to live beneath their means for as long as it takes to reach their financial goals. While their peers are showing a tendency toward embracing the good life at the first sign of prosperity, the would-be wealthy take a pass on all of that.
While others are saving 6-10% of their annual incomes — usually for retirement — people who want to be wealthy often save 20, 30, 40 or even 50% or more of their incomes.
Imagine how much money you’d have saved in 10 years if you saved half of your income during that time? The fact that no one ever sees this happen is one of the reasons that people believe that the wealthy somehow “come into money.”
2. Spending well
The self-made wealthy learn early in life that you never pay full price. The combination of this habit with delayed gratification is a powerful force when it comes to growing wealth. Not only do you spend as little money as possible, but you buy at a discount when you do.
While most people are buying the most expensive house they can afford, the rich-in-progress buy beneath their means, and buy the cheapest house in the neighborhood to boot. They first ask themselves, “how much house can we truly afford right now?” The same is true of buying cars, if one wants to be rich someday, he buys a conservative car — and buys it used.
3. Fleeing from consumer debt
Debt represents a reduction of future cash flow and the wealthy will avoid it. By paying cash on the barrel, there are no strings attached to what you buy that might compromise your ability to continue saving money at a high rate.
Notice how the drive to save large amounts of money causes frugal spending habits, which then enable the ability to make purchases without using debt; the three wealth habits combine to form a pattern that brings the aspiring rich to the point of great wealth earlier than an outsider might expect.
4. Seeking low risk/high yield investments
If you want to be rich, the first rule of investing is to not lose money! If you have a small amount of money to invest you might be tempted to put it all into high-risk growth stocks in the hope that a big run-up in value will make you rich. But if you have — or hope to have — a large portfolio to invest, you might not take that kind of risk. Your investments will be in assets that are unlikely to collapse in price, reasonably likely to grow in value over time, and able to provide a steady cash flow while you wait for them to grow.
For the rising rich, a perfect investment asset might be an undervalued (and therefore very likely to grow) blue chip stock (not likely to collapse) with a history of above-average dividend yields (steady cash flow). He doesn’t need for his investments to make him rich — he’s already on his way there, and just wants to further grow his wealth, steadily and predictably.
5. Only doing what matters most
My wealthiest clients have the ability to center on the most profitable ventures and to let go of nearly everything else. They often do this by delegating non-profitable activities to others or maybe even to make them somehow go away.
This is easier to do when you have money to pay others to handle them for you, or when your finances are relatively uncomplicated. If, for example, the rich person has a business, he might pay someone to handle specific aspects of the operation that are necessary but produce little or no revenue. That frees him to concentrate all of his efforts on generating more income for his business. As a result, his business and his income grow much more quickly, making him wealthier still.
One thing I’ve seen in my clients with means: Becoming wealthy is really a lifestyle as much as anything else. Once you adopt it — by living beneath your means, staying out of debt, and saving large amounts of money constantly, you have capital to invest (conservatively) and to pay others to free you up to make even more money. It’s not so hard to see why the wealth of the self-made rich seems to spring out one day as if there’s a winning lottery ticket in the mix.
But that’s simply not the case, and my self-made wealthy clients know this.
6. (A bonus, if you will.) Perhaps this goes without saying, but these observations are drawn, well … from my clients. They’re pretty smart, yes? Perhaps a simple first step for you would be to join their ranks!
James Pantzis, CPA, PC
I wrote this piece a couple months ago to my business clients and colleagues, whom I keep in touch with outside of these “Personal Strategy Notes”, and I felt that as we turn the corner into March (and we’re staving off the lions, hoping for lambs), it was something that ALL of my contacts should hear.
It’s about how we process the world around us.
But before I get there, a tax-related alert (and follow-up from last week):
* The Department of Treasury has announced that the IRS will not collect additional taxes from those 50,000 (or so) taxpayers who had already filed using the bad forms 1095-A. In other words, if you’re one of those 50,000 taxpayers who has already filed using those bad forms and you would have owed money by using the corrected forms, there’s no need to file an amended return. If, however, you have already filed and the revised forms benefit you (meaning you’re due money back), you likely want to amend your returns. Give us a call if that’s you: (718) 858-9864
If you have NOT filed your taxes yet, and you received a bad form, it is important to note that we need to wait for the corrected form 1095-A to arrive before we can send your paperwork into the Treasury.
Now … I pay attention to this stuff, so you don’t have to.
Honestly, I’m tired of seeing clients and friends who are “beaten down” by all the fear and stress in their lives.
And there is one major source for it — which is entirely optional.
I suggest you “opt-out” of it, if you will.
James Pantzis On Carving Away The Fear
“Derive happiness in oneself from a good day’s work, from illuminating the fog that surrounds us.” – Henri Matisse
Life in the modern world isn’t always a trip in the sunshine.
But it’s made so much harder by the tendency of our world to suffocate you with mental junk and global negativity.
I believe that the number #1 danger for ALL of us moving forward in 2015 is allowing today’s world to starve your brain with “junk food” and deaden your spirit with the overwhelming feeling that you are small, insignificant … helpless.
I’ve learned to avoid the 24-7 news channels, and the sites online that traffic in fear. I figure that I’ll see what I need to when seeking out resources for our clients about current events. But recently, I did, in fact, watch some CNN.
Now, CNN is about as bland as you can get — it’s “normal” to “normal” people. But I also realize, most “normal” people accomplish relatively little in their time on this planet (at least on the outside). Those of us who are going somewhere in life must have better things to do than to listen to talking heads opine about dozens of tragedies that we can’t (and won’t be able to) do anything about.
But right now, the world is swimming in negativity. And you need to be serious and proactive about it. Because — if you don’t — it’ll kill your vocation, kill your career growth, kill your dreams and everything you really care about.
The mass news media is NOT your friend.
They feed on fear, and they sell paranoia, division and hyperbole. It’s what they do.
And not only must you protect yourself from this drip, drip, drip of depression, you need to fight it on behalf of your family and friends, your coworkers and customers.
Tell them what’s good. Greet them with a smile and with encouragement. Tell them what they’re doing right. Give them a voice to the hope within their bones — which is too often buried in a junkpile of media-fueled negativity.
You (and they) need to celebrate little tiny victories. Every. Day.
This is an essential skill for a business owner — and for all of us: when you have a major victory in your life, you need to find encouraging people who will celebrate it with you. Because good news is good news indeed.
Let’s continue to make the rest of 2015 full of JOY, shall we?
James Pantzis, CPA, PC
As I’m sure you’ve heard me say before, it’s a good idea to check the accuracy of those tax statements you receive in the mail.
Well, on Friday the 20th (Friday afternoon being the perfect time for dumping this junk into the media), those of us who were paying attention found out that almost 1 million taxpayers who purchased Obamacare health insurance (the Affordable Care Act) don’t have to bother — their forms are wrong anyway! http://1.usa.gov/1Dets8r
Details are on that link above, but about 800,000 households will be contacted by HealthCare.Gov to let them know their information is wrong. And then another 100,000 or so in California were sent the wrong info as well (which was announced the previous week): http://cbsloc.al/1DeuiSv
Which means, of course, they’d like you to hold off on filing your federal return until all the info is correct. We should be able to access it by the end of the month.
This does NOT mean you can’t have us prepare your taxes. We will simply get all the rest of your information handled and prepared … and just as soon as we are able to input the correct information from Form 1095-A, we’ll fire it off to the ol’ Treasury Department.
We do, of course, want to make sure that you receive every deduction to which you are entitled! So, in the interest of jogging your memory from the year … here are some “interesting” 2014 tax deductions that you may or may not be aware of…
Let us know if we can help you with any of these: (718) 858-9864 or http://www.accountantbrooklyn.net//contact
Pantzis’ Top 11 Overlooked Tax Deductions for 2014
“The important work of moving the world forward does not wait to be done by perfect men.” – George Eliot
Have you thought about these …?
1) Pet Food and Veterinary Bills: You can deduct veterinary bills and pet food, only if they are for your foster pet. As an example, Jan Van Dusen, a California family lawyer, devoted most of her time outside of work caring for feral cats, 70 to 80 at one time. A tax court found that she was entitled to much of her claimed $12,068 in cat care expenses as a charitable deduction on her income taxes. In another case, Seawright v. Commissioner (http://1.usa.gov/1DexKfV), a couple ran a junkyard. They put out food to attract wild cats to control snakes and rats, making the junkyard safer for customers. When they claimed the cat food as a business expense, the IRS said no way. However, the tax court disagreed.
2) Moving Fido: If you are changing jobs and meet a couple of tests, you can deduct your moving expenses–including the cost of moving your dog, cat, or other pet from your old residence to your new home.
3) Swimming Pools: If swimming pools are used for medical purposes, as prescribed by a doctor, they can be tax-deductible. In Cherry v. Commissioner (http://bit.ly/1Deyf9T), the taxpayer had emphysema and installed a swimming pool after his doctor ordered an exercise regimen. The primary purpose of the pool was medical care, so he was able to deduct the pool, part of the cost of heating the pool, pool chemicals and part of insuring the pool area.
4) Fitness: Fitness is tax-deductible, if your doctor signs off on it, and tells you that your life might be in danger if you don’t start exercising and lose weight. The cost for remedies that help you drop a few pounds, improve your heart rate, or reduce your cholesterol might all be deductible.
5) Significant others: Couples who can claim their significant other as a dependent can also use them as a tax break. In order to do so, couples must have lived together for an entire tax year and the significant other must have an annual salary of less than $3,900. Also, the individual claiming the tax break must show they have paid for more than half of their significant other’s expenses. A total of $3,900 can be claimed if all the qualifications are met.
6) Deadbeat Friends: Did you lend a friend cash in a pinch, never to see the money again? Don’t despair–all is not lost. You can write off the unpaid amount if there’s no hope to collect payment.
7) Organ Donation: Organ donors can deduct not only any medical costs associated with the donation, but also costs of transportation.
8) Hunting: As long as business discussions are conducted and you are attempting to do business on the hunting trip, it would be possible to deduct this type of expense. However, these types of deductions may be heavily scrutinized.
9) Bariatric Surgery: The IRS ruled that obesity is a medical disease, which means that specific treatments aimed at curbing obesity are allowable deductions, including bariatric surgery. As with all medical expenses, you can only deduct unreimbursed expenses that exceed 10% (7.5% if over 65) of your adjusted gross income (AGI).
10) Addiction Treatment: Drinking, smoking, and drug abuse are serious medical hazards, so the IRS has ruled that you can write off expenses related to quitting. Eligible deductions can include the cost of any products or programs designed to help you quit, including nicotine patches or other aids. In-patient treatment at a drug or alcohol facility including meals, lodging and some transportation expenses can also be deducted as medical expenses. Additionally, transportation to and from meetings like Alcoholics Anonymous or Narcotics Anonymous, if attended based on doctor’s orders, can also be written off.
11) Bingo: Bingo-playing taxpayers can deduct the amount lost in a given year, up to the amount that was won. The IRS allows taxpayers to deduct losses for other types of wagering, too. To do so, they must keep a detailed diary of the kind of wager, where they placed it, who they were with, and how much they won or lost.
These are just a start to the sort of things that we can help you find in your tax year. Oh — your friends’ current software or tax professional didn’t help them find these? Hmm … maybe it’s time you helped them find someone who could?
I hope this helps.
James Pantzis, CPA, PC
Before I get to the love stuff, we’re continuing to (loosely) track the saga of fraud detected from within the user base of TurboTax. Again, charity (and/or my lawyer) requires that I emphasize that the makers of the tax software seem to have done everything they possibly could to ameliorate the problem and respond well.
But now it seems that federal returns (not just state taxes) may also be threatened: http://onforb.es/1L572Kw
Possible fraud is just one reason to be cautious when submitting your tax and financial information to the government through a consumer software.
Also on the list: in-person help, years of expertise, a support option that doesn’t include phone-tree Siberia (a better option: (718) 858-9864), and more.
But again, I don’t want to pile on too heavily. We’d love to serve you this year — and take all of the annoying paper/software work off your hands. It’s what we do best!
And speaking of not piling on … how’d you do on Valentine’s Day? Perhaps it didn’t really apply to you this year, or perhaps marriage isn’t on your immediate radar.
But for many of my clients, the real work of love is forged through the stuff of everyday life. Not just on one particular day. And, of course, money is a big part of that.
I’ve noticed that *finances* can be a major sticking point in a good marriage.
But there are some simple steps you can take (five, by my count), which will ensure that you don’t ever fall into the trap of letting a good marriage be spoiled by money miscommunication.
Read on, and send your feedback. And, of course, if you need help with any of this, or if you have any pressing tax issues or questions, email me (you can use the mail button in the upper right of this page), or call us at (718) 858-9864 . We *love* serving YOU!
James Pantzis’ 5 Keys to Great Financial Communication in a Marriage
“Lots of people want to ride with you in the limo, but what you want is someone who will take the bus when the limo breaks down.” – Oprah Winfrey
Money problems can ruin the love affair with your spouse. The work of blending two lives in harmony requires certain basic commitments. It’s a fact that many families today are financially troubled.
Most of these are in denial. The rest of them are looking for a quick fix. Even a financial planner can’t help unless the couple is willing to make five simple commitments. You can always choose to find something to fight about. But if you are serious about removing the financial obstacles in your love life, you should commit to the following money management rules.
1) First, take the time to provide open accounting to your spouse. Most financial arguments are not about how to spend your money–but about how the money was actually spent. Just like every publicly traded company is required to give a public accounting of its finances, couples should do the same. In the public sector, it’s considered a scandal when a corporation fails to provide its financial information in a timely fashion. The same rules should apply at home. Financial accountability, openness, and honesty are essential in marriage.
2) Next, make a saving investment in yourselves your first priority. Pay yourself first. Couples should agree on a savings and an investment rate and should prioritize their savings above all other budget categories. Savings should be automated and protected from impulse spending habits.
I’ve come to believe that, in certain cases, savings might even need to be prioritized above debt reduction. I’ve found that some couples that are in debt cannot seem to get out of debt because they are using what should be going into savings to service their debt — rather than adjusting their lifestyle so that they are spending less than they make. This can sometimes make that debt spiral worse … but again, should be considered in light of the bigger picture. Get your spending under control! Which leads to …
3) Set a limit on what you can spend without first getting the approval of your spouse. Each spouse must sign off on spending that might be a budget buster. If you are young or your finances are in trouble, the amount should be fairly low. As you get more experience and your finances are in harmony, you can raise the amount. Any purchases above that amount should require the agreement of both spouses.
In the same way, any purchases beyond what was budgeted should require the agreement of both spouses as to which budget category is going to be reduced in order to make up the difference. If your spouse asks you to wait before making the purchase, lean toward waiting graciously. Ask what you would do if you did not have the money at all. Then, do that instead. Delaying a large purchase even by a month can significantly increase your financial health.
4) Set rules for the acceptable use of credit. In my experience, the easy use of credit cards ruins much financial harmony. It is better when the use of credit cards is limited to only certain required budget items. Using a credit card for groceries or gasoline may be harmless. But when credit cards are used for clothes or eating out, optional spending is unnecessarily inflated.
There are several advantages to using credit cards. But each of these advantages become powerful disadvantages for a family struggling to make ends meet. Credit allows couples to avoid asking the tough question about what they would do if they did not have the money. Credit makes spending easy and simplifies check-writing. These advantages are about as helpful as giving an alcoholic a place to sleep in the back of the bar.
Either spouse should be able to veto the use of credit cards entirely. Only if both parties agree to the use of credit cards, should they be allowed – and then only within certain guidelines.
Credit should only be used for specific required monthly categories, and then only by the spouse who is less apt to make extra purchases on impulse. If you are struggling with your finances, stop using credit cards entirely.
5) Lastly, agree together that ignorance is no excuse! Both parties must be willing to learn. Just like a good love life, finances cannot be handled well by just one party. Many problems stem as much from ignorance and abdication by one party than spending by the other. If you don’t have the time or the interest to be involved in the family’s finances, then you may be the problem. Ask for help and start learning.
Look, I’m not a marriage counselor. But I DO know good communication when I see it.
I hope this helps.
James Pantzis, CPA, PC
The tax world was roiling late last week over some fraud detected from within TurboTax.
Here is the story: http://onforb.es/1DNkQot
Essentially, the makers of the software detected a level of fraud occurring in state tax return submissions that made them decide to completely shut down submission of those returns for a period of time. Eventually, they determined that the apparent source of the fraud was outside of their system, and have resumed filing state tax returns. It does seem that TurboTax did everything by the book, and should be (relatively) safe to use.
What is the takeaway for taxpayers? Perhaps trusting your most sensitive (and financially-important) interaction with the state and federal government to a software, rather than a real person (who will sign their name on your return and shoulder the burden with you) should give you … pause.
Again, TurboTax seems to have handled this fairly well, all things considered. But when there’s a problem or question — would you rather sit on hold with the IRS, deal with online chat help, navigate through instructional videos, etc. etc. — or deal with a human who knows you?
Now … all that said, we’re pretty darn good at navigating the labyrinth of our tax system around here. But we may not be the most authoritative source on All Things Valentine.
That doesn’t prevent me from chiming in on it this week though, with a little penny-pinching twist, if you will. That, after all, is what we tax pros are GREAT at (finding ways to save!).
And just because it’s tax season doesn’t mean I won’t offer dating advice.
A Tax Pro’s Valentine
“Whatever you are, be a good one.” – Abraham Lincoln
Look — whatever your particular financial situation, wouldn’t it be great to create romance “magic” without spending an arm and two legs? So, instead of the tired old “flowers, candy and chocolate” [boring!], here are a few of my favorite modest (and occasionally tongue-in-cheek) suggestions for a sizzling Valentine’s … one that won’t torch your wallet!
Make a Video: You can use the video setting on your phone or digital camera, and create a heartfelt message of love for your sweetie. Then, post it to YouTube, Vimeo or another online video-sharing site and send it on! Um, just be sure to make that video setting to “private” unless you want to share with the world your undying love for your honey (hopefully with clothes on!).
Learn a Romantic Song and Sing it to Your Sweetheart: Well, I’m no singer, so I can’t say I’ve tried this … but I hear it works well. Even better, if you can’t sing, your valentine will give you kudos for the effort! You could step it up by writing an original song and then sing it. Or, for the slightly-less courageous, you could pull a page out of John Cusack’s book in Say Anything and hold a boombox (or iPod) above your head and blare Peter Gabriel’s “In Your Eyes”. That seemed to work.
Not a singer? More of a writer? Or artist? For the otherwise artistically inclined:
– You could pen a poem on nice paper
– or even paint it
– You can paint a picture of your honey. Just be sure it looks good.
The “Mix Tape” (or Playlist): This is an old standby of high school kids everywhere. Except these days, the “tape” part is a bit less convenient. Instead, make a CD or mp3 playlist of Sweet Love Songs and make a cover list / liner notes on the memories of you and your honey from the songs. And you can make a Personalized Photo Album using Shutterfly or a service like it.
Romantic Picnic: Surprise your love with a ‘picnic’ in the park, at the beach, or any other outdoor nature spot. If the weather isn’t ideal for outdoors, you could bring the outdoors inside — find a fake palm tree, flowers, sand, beach umbrella, radio, towels (borrow them). Nothing says “I love you” like fake palm trees!
Write a Message To Be “Stumbled Upon”: Well, perhaps not *literally* stumbled upon (nor am I referring to the website), but try a nice outdoor surprise. With snow outside, you could stomp out the message and fill in the letters with spray paint or flower petals or rocks. Without snow, you can use sidewalk chalk to write a message to your sweetie.
Now — who said tax professionals weren’t good for anything other than your finances? Oh … hmm. That would be Abraham Lincoln (see my opening quote below the title).
Perhaps we should keep our advice restricted to things financial. Ah well.
Happy Valentine’s Day, regardless!
And please feel free to call [(718) 858-9864] or email me and my staff with any questions: http://www.accountantbrooklyn.net//contact (just no dating questions, please!).
To a loving — and financially sound — February …
James Pantzis, CPA, PC
We’re knee-deep in tax forms and legal documentation this week (with a nice little dash of healthcare forms thrown in, new for this year). Our families miss us (though apparently, according to the commercial last night, all will be forgiven if I purchase my child a Nissan Maxima), and we’re still in the first quarter of OUR yearly Super Bowl. Fortunately, before we left for the office this morning, we made sure to bubble wrap our children so that they wouldn’t perish before tax season’s completion (thank you, Nationwide Insurance).
And speaking of children … well, my riff on those Super Bowl commercials leads me to what I’m writing about today.
When we sit down with a client during tax season, we are picking through history — we are helping you to sort through your 2014, and to make sure that the numbers match … AND, of course, that YOU are able to take advantage of every possible legal and ethical method to hold on to your hard-earned dollars (or sometimes receive a nice bump in your supply from a refundable tax credit).
But we also like to spend time future-casting with our clients, if they let us.
In conversations about the future, we can make the most careful plans when it comes to the disposition of our financial assets, but can we also think … bigger?
James Pantzis Suggests You Don’t Just Pass Along Money …
“In three words I can sum up everything I’ve learned about life: it goes on.” – Robert Frost
Too many tax and accounting firms focus only on the financials, and neglect to help families identify, articulate and pass along their dreams, passions and hopes for their children and loved ones.
Yes, some families take the bull by the horns, and do this themselves, but it makes really good sense to get outside help in making absolutely sure that every base has been touched.
Because really — what are you after with all of that money we help you save on your taxes?
It’s worth putting some thought into it.
Specifically, your children and your loved ones should be able to have resources and tangible memories which help them answer these kinds of questions:
* What dreams did they have for me?
* How have they seen the world change around them, and how do they feel about it?
* What kind of family were they hoping to create?
* Were there any mistakes made which they’d like to see me avoid?
* What activities were they most glad to have participated in?
* How did they make decisions about what to do as a family?
There are of course more questions like this that you could cover … but the main point I want to make with you is this:
You just never know when these questions will be asked.
And, I hope you put in place the right tools to make sure they’ve got the answers when they need them most. Whether that is after your “work is done” on this little planet — or, even better, while you still have the time to affect it all.
We are in your corner, and want to think bigger with you. Let us be your advisors in matters like these.
To your family’s financial and emotional peace…
James Pantzis, CPA, PC
For us here at James Pantzis, CPA, PC … well, things are heating up. Tax documents are trickling out (organizations have until Monday, Feb. 2 to send everything your way), electronic filing of returns became possible last week (we’ve already filed more than a few!) … and our phone has begun to ring with regularity [(718) 858-9864 in case you need it].
So friends, make sure you call us soon to set up a time where we can go through your situation with you. After all, would you rather spend 18 hours going it alone — or have your trusted advisor do it all for you?
But a quick tax item, regardless of how you prepare:
Here’s the list of forms you should be looking for in the mail, and online (from any employer, vendor, client or anyone else with whom you had a taxable transaction last year):
* Wage earners, watch for your W-2 forms, one from each employer.
* “Other income” (like a state tax refund, or government benefits) is shown to you on Form 1099-G
* Prize winnings — Form W-2G
* Most canceled debt (but not all) is reported as taxable. In which case, you’ll get Form 1099-C
* 1095 Forms if you purchased your health insurance through a Marketplace or exchange
… as I’m writing this, I realize the list is extremely long. Here’s a good place for the whole list: http://1.usa.gov/1zPwS2o [this is a list of all forms due out from organizations, and it’s worth looking over to see what you should be expecting, if the conditions apply.]
Now, for my primary message, on unintended consequences …
James Pantzis Discusses When Our Tax Policy Affects Families
“If a man has any greatness in him, it comes to light, not in one flamboyant hour, but in the ledger of his daily work.”
– Beryl Markham
Every year, I sit down with Brooklyn families who made a particular financial move, and as a result, some unforeseen — and unintended — consequence kicked in. This could be an unexpected tax event, it may have been a broken relationship, or a business failure. (All of which and more, by the way, is why you should be sure to ask us about tax PLANNING this year, rather than simply tax “reporting” — which is what the tax return preparation process really is.)
But sometimes these consequences are because of the tax code itself.
Take marriage, for example.
The foundations of most civilizations function on the principle that children are best raised in a home by two parents in a committed relationship. As such, couples have always been encouraged to marry.
(My point in this article, by the way, is about what’s in the tax code, and how it encourages social change. So this is NOT at all to speak of anything related to the special heroism which is single parenthood.)
But for many couples, our current tax code actually discourages marriage, and I think it’s a shame.
Here’s how it does so…
An individual who is working but makes a smaller income qualifies for the “Earned Income Tax Credit” (EITC). It’s refundable, which means that whether you owe that amount in tax or not, you may still receive it as a refund.
The amount is calculated based on your salary, filing status and number of children. There is a plateau at which point the amount of the credit goes down.
Without going into all the math, let me show you an example:
If you and your partner are not married but have two children, you have some flexibility. Each of you can earn $17,100 and still collect the maximum $3,305 for a total of $6,610.
A married couple, on the other hand, with two children earning the same $34,200 would only collect $3,156. The formula “penalizes” them $3,454, or 10.1% of their salaries, simply because they are legally married.
And the marriage penalty only increases as income and the number of children rise. The”penalty” can be as high as $8,400 when compared against unmarried couples in certain salary levels.
This should be sobering to us as a society. I have no problem whatsoever with each individual making their own choices in these matters. And the EITC receives support from all parties because it’s an incentive to work (it only is received when there is a job in place). But we shouldn’t disincentivize a civilizational building block through our tax code. (And I also hope that a few thousand dollars doesn’t keep people from embracing the richness available to them in marriage!)
One solution could be to extend it to all individuals equally, regardless of marital status. And, to be fair, there are instances where there is a marriage “bonus” (usually in the case when one spouse has a much higher income than the other).
But the main point I want to get across is this: our choices have consequences, many of which aren’t immediately apparent — both in the tax arena, and otherwise. So be wise, and have a caring and competent guide as you make tax and financial decisions moving forward.
It helps to have someone who’s seen the road ahead.
To your family’s financial and emotional peace…
James Pantzis, CPA, PC
Now is around the time when things begin to really crank for us around here. It’s the week which the IRS is opening up actual e-filing (as of Tuesday, the 20th), and many people have received all of their paperwork necessary for completing their returns.
But there’s also a temptation that I hope you’ll resist. Sadly, my writing this could easily be seen as self-serving, but that doesn’t keep it from being true. Here’s what I’m referring to:
Trying to prepare your taxes correctly on your own.
You see, I don’t like to crow about other people’s mistakes.
In fact, in our line of work, much of what we get to do is to *fix* or alleviate those mistakes, at least when it comes to their tax implications. This year (of ALL years, with the implementation of the ACA wreaking big havoc in the preparation process) carries so many changes that users who fall prey to screaming offers from the “cheap” options are more exposed to wallet-sucking mistakes, or even an audit.
Plus, when you see stories like this one: http://cbsloc.al/14EVFs4 … well, you can be grateful that you trusted a real person, not a blind corporate monolith.
Further, do you remember when the Treasury Secretary (at the time), Tim Geithner, testified about tax irregularities in his own personal returns? Do you remember where he placed the blame?
And he’s not alone. But there’s a good way to fix that problem…
James Pantzis Uncovers A Case of Misplaced Trust
“Things can fall apart, or threaten to, for many reasons, and then there’s got to be a leap of faith. Ultimately, when you’re at the edge, you have to go forward or backward; if you go forward, you have to jump together.”
– Yo-Yo Ma
You may have heard me say it before, but it’s true: Did you know that we accountants like to joke to one another about how good these online software programs (TaxSlayer, TurboTax, etc.) are for our business? Firstly, they are not as “easy to use” as claimed, and secondly … they cost you an arm and a leg.
You might think they’re cheap. And on the surface, you might be right (though, in the last few years, a $1 Billion class action lawsuit was filed in the federal court in Philadelphia alleging gross misstatement of fees and deceptive standards of the federal “FreeFile” program … so even on the surface, it wasn’t always cheap).
But I’m not even talking about the money for the service itself.
Using those programs can end up leaving hundreds, or even thousands of your dollars in the coffers of Uncle Sam … even if you follow all of their instructions to a tee. I see it all the time–frustrated clients bringing in their prior year’s tax return, astonished at all the “hidden money” my staff and I are able to find for them!
Choosing the wrong method, or forms, in filing your taxes can place you directly in the crosshairs for an audit.
Even if you don’t owe a ton of back taxes, you still don’t want your record to show some IRS agent that there has been a discrepancy of some kind in the past, so that red flags begin to fly, and then more bureaucratic people start looking through all of your past tax filings and current income holdings … basically taking your social security number, and poking around in your private life.
(And if you think they won’t do this, read a little online about the increased “enforcement” measures the IRS has been taking year after year.)
They can do a lot of things you won’t want them to do. However, if you keep a clean slate (no IRS correspondence with you, related to filing your taxes incorrectly), the opportunities for them to mess with your personal stuff will be limited.
Here’s another reason why this is so important … now more than ever. New government regulations in 2014, delays in Congressional action, and issues with refund “loans” from the big chains are creating a mess in the tax industry… and with this year’s implementation of the health insurance requirement on tax returns, you don’t want to be left at the mercy of a piece of software, or a poorly-trained temp in a corporate tax prep “store”.
Yes, it can be seductive to “go it alone” … to trust a piece of software to point out possible deductions. To trust your work to poorly-trained preparers in a big box office. To protect against your chances of audits through online chatroom support or hourly employees.
But it can be a big trap.
Just ask Tim Geithner.
So, let’s get your financial paperwork in the hands of someone who cares.
To your family’s financial and emotional peace…
James Pantzis, CPA, PC