Monday, December 11, 2017

Keep Your Kids Occupied During the Upcoming Holiday Break Teach Them These 4 Smart Money Lessons

 Personal finance is often learned through experience. Fortunately, you can give your kids a hand-up on their journey to becoming financially responsible adults.

Preschoolers and teenagers obviously have different financial concerns and abilities. But there are a few basic lessons that all children should learn by the time they enter college or start a career:
  • Money = choices. Teach your child how to choose between spending and saving, and how to do both intelligently. A regular allowance will help your child gain real-world financial experience.
Make sure they spend some of their break doing chores and earning money.
  • Money requires planning. At about age 9 or 10, start to show your child how to develop a simple spending plan. In later years, demonstrate how to plan for larger expenditures.
Sit down and set up a holiday spending plan with them, how much will they spend on each gift they want to purchase for family, friends, teachers, and neighbors?
  • Responsibility comes with money. Inevitably, your child is going to make some money mistakes. Try to avoid criticism, but don’t automatically fix every problem and let your child off the hook.
Has your child make a financial mistake recently? Sit down and help analyze the reason for the mistake, and suggest how to avoid it in the future.
  • Good money management skills are priceless. Specific lessons might range from how to compare interest rates on savings accounts, to the pros and cons of mutual fund investing. But there should be one common element to all of your teaching in this area: money doesn’t take care of itself.
Ask your kids what they want to do with their money or how they want to earn it to direct the conversation and know what it is your child really needs to hear.
The way you handle your money may be the most powerful lesson of all for your children. For your child’s sake, as well as your own financial wellbeing, it’s important to practice what you preach.

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Monday, December 4, 2017

Savvy Generosity: Do it the right way


Giving on a yearly basis could trim both your estate and income taxes. First, there’s the annual exclusion for gifts. Currently, you can give $14,000 annually to any number of recipients without paying federal gift tax. Married couples can double this amount by gift-splitting – a gift of $28,000 from one spouse is treated as if it came half from each.

Why giving is a two-way street


Gifts do more than help out children who need the money. They also reduce your estate so your estate will pay less estate tax upon your death. Apart from annual gift giving, you can currently transfer (during your lifetime or through your estate) a total of $5.49 million with no estate or gift tax liability. On amounts above this threshold, you or your estate will be faced with taxes at the current top rate of 40 percent. So a consistent program of annual gift giving might create substantial tax savings.

Note that gifts to individuals do not entitle you to an income tax deduction. A gift isn’t a charitable contribution. Conversely, a gift doesn’t constitute taxable income to the recipient. Gifts of income-producing property may, however, reduce your taxable income. Once you’ve given the property away, the recipient (not you) receives the income it produces and pays any income tax due on it.

Giving can be easy


One advantage to annual gift giving is that it is relatively simple to do, especially if you’re giving away cash. Another advantage is flexibility. You’re not locked into anything; you can see how much you can afford to give away each year. You can give away anything – cash, stock, art, real estate, etc. Valuation is the fair market value on the date of the gift. Subsequent appreciation, if any, belongs to the recipient’s estate (not yours).

Before you give away assets, be sure you will not need them yourself to provide income in later years. Consider the impact inflation will have on your resources.

Proper planning is essential in this area; get professional assistance before you do any gift giving. Contact our office if we can help.

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Friday, December 1, 2017

Here’s How to Stop Dreading Year-End Employee Reviews

It’s the time of year when you may be scheduling employee reviews. The employee knows he or she will hear about the good and the bad, and the supervisor will finally have to discuss those issues he or she has been avoiding all year. Usually both parties fudge a little and are glad that it’s over for another year. It’s another chance for open communication and feedback lost.

Don’t miss out on an opportunity to connect with your employees. Instead, try these tips:

Hold occasional employee check-ins. To improve the process, consider holding performance appraisals more frequently, perhaps even quarterly. This can help make the appraisal less of a “special event” and more of a routine exchange of information. It also means your feedback is more directly related to your employee’s recent performance, rather than coming months later.

Give timely feedback. If an employee does something wrong, or something good, tell him or her immediately. Point out the problem, make sure the employee acknowledges it, and make clear what you expect in the future. And if it’s something good, the employee will appreciate receiving a pat on the back. With immediate feedback, there should never be any surprises at review time.

Create an employee review summary. At the end of every appraisal, summarize the discussion and put the highlights in writing. Make sure your employee gets a copy. Before the next appraisal, ask your employee to review the copy and prepare his thoughts on his most recent performance. Ask him to present his opinions to start the discussion. If there are areas needing improvement, agree on an action plan and put that in writing too. And that might be a two-way street. It could involve your providing training or taking actions to support the employee, so make sure you’re living up to the agreement.

Don’t limit the appraisal to a scorecard on the employee’s achievements. If appropriate, use it to discuss career planning, cross-training, or job enrichment. Solicit ideas from the employee. These techniques can help turn a judgmental meeting into a constructive exchange of ideas.

Good luck!

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Wednesday, November 15, 2017

Tax Reform: What You Need to Know

 There is now a ton of media chatter about the recently introduced federal tax reform package being passed around in Washington, D.C. While it’s still early in the process, here are some of the key elements of the current proposal.

For individuals :
  • Individual tax rate brackets trimmed to three rates of 12, 25 and 35 percent, down from the current seven brackets.
  • Nearly doubling the standard deduction, to $12,000 for individuals and $24,000 for joint filers.
  • Eliminating all but two itemized deductions: home mortgage interest and charitable deductions.
  • Eliminating personal exemptions for dependents, but increasing the Child Tax Credit.
  • Repealing the estate tax.
  • Repealing the Alternative Minimum Tax (AMT).

For businesses :

  • Cutting the top corporate tax rate to 20 percent from 38 percent.
  • Capping at 25 percent the tax rate for pass-through corporations including sole proprietorships, partnerships and S corporations (down from the current 39.6 percent max).
  • Shifting international taxation to a territorial system, encouraging U.S. corporations to repatriate earnings from foreign subsidiaries.
  • Allowing full expensing of business investments, rather than the standard depreciation model.

It’s not official yet

Please recall that much needs to occur before any tax reform proposal makes its way into law. There is sure to be much discussion over a few points, including:
  • The current proposal does not account for how any federal revenue shortfall created by this reform will be addressed, nor how it will impact government spending.
  • Many constituents will battle to retain their deductions. For example, being able to deduct state and local taxes on a federal return is very important for residents of high-tax states such as New York and California.
  • With the elimination of so many deductions and the increase in the standard deduction, fewer taxpayers may decide to use itemized deductions if this reform is passed. This could impact the value of the home mortgage interest and charitable contribution deductions.
  • Taxpayers in the lowest income bracket see their rate rise to 12 percent from 10 percent. The proposal authors say this will be offset by the higher standard deduction.

Action required?

Given the Republicans’ slim margin of seats in both the House and the Senate, any defection within their ranks could derail this legislation. This was the fate of the health care reform bill earlier this year. Because of this, the best course of action is to wait and see. Whatever ends up happening in Washington, rest assured that you’ll be informed of what you need to know, and help will be available to review any of the changes as they impact your situation.

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Monday, November 13, 2017

Conquer your financial clutter

Financial records are notorious for being messy. Bills, paycheck stubs, tax returns and bank statements have a way of getting tucked into random places. Luckily, there are a few pretty painless ways to organize your important documents.

Put all your financial records in one dedicated spot
To ensure that bills are paid on time, bank statements are reconciled and important documents are properly filed, set aside a specific location in your home for financial tasks. It may be a place where you keep a computer or filing cabinets. Once that area’s set aside, pick a time each week to pay bills, enter financial information into check registers and organize documents.

Organize in a way that makes sense to you

Many people use a computer program to track everyday spending and bank accounts. Others use a pencil and paper. The key is to use whatever system makes sense to you and helps you maintain your finances with a reasonable amount of effort.

Protect the important stuff

Don’t leave your only copies of wills, tax returns, stock certificates or emergency contacts in a pile on the desk. Such documents should be put in a safe deposit box or home safe. Ask your attorney or financial advisor to store the signed copy of your will in a secure location.

Get rid of the documents you don’t need anymore

Many papers (such as regular household bills) can be shredded soon after receipt. Other documents, such as those supporting the cost of investments and real estate, should be retained longer for tax purposes. A general rule for tax returns (and documents that support the returns) is seven years. When it’s time to discard those old pieces of paper, fire up the shredder.

Not sure about what financial records you need for your taxes? Call us up – we’ll talk you through it.

 Extra content

If your investment portfolio has a few duds in it, consider tax-loss harvesting. Let us help you turn a loss into a tax advantage.

 ITEM #2 –

No change to fourth-quarter interest rates

Fourth-quarter interest rates will stay the same. Those rates include: 4 percent for overpayments (3 percent for corporations), 1.5 percent for the portion of a corporate overpayment over $10,000, 4 percent for underpayments and 6 percent for large corporation underpayments.

 ITEM #3 – Are you withholding enough for taxes?

Don’t leave it up to chance – check your 2017 tax withholdings while you still have some time to make changes. You can use the withholding calculator on the IRS website to see if you are paying too much or not enough. To make a change, fill out a Form W-4 and give it to your employer. You’ll end up filling out another form in early 2018 to adjust your withholding schedule.

ITEM #8 – Considering leasing your business real estate?

If your business is incorporated, it may be a good idea for you to own the business real estate and lease it to your corporation. That’s because there are a number of tax and nontax concerns relating to real estate ownership. Before you acquire new business property or change the ownership of property you already have, give us a call. We can discuss tax considerations.

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Tuesday, November 7, 2017

Employee meals: 50 or 100 percent deductible?

Everyone loves a free meal – especially employees. However, your business tax return will be affected differently depending on the circumstances of the mealtime experience.

While you can generally deduct only half the cost of meals related to your business activities, the tax code includes specific exceptions that allow a deduction of 100 percent of what you spend on food and beverages in certain situations. Here are three examples:

  • Social gatherings and parties. That once-a-year holiday party qualifies for 100 percent deductibility as long as it is primarily for the benefit of all your employees.
  • Food with nominal cost. Do you supply morning-meeting donuts, meals for overtime work or special occasion treats for your staff? “De minimis” employee benefits — those small items your business pays for that are not considered taxable income to your employees— are typically 100 percent deductible.
  • Employees on emergency calls. If you provide food for your employees during working hours so they can be available for emergency calls, the meals will likely be able to be deducted 100 percent.
Remember that you’ll still need to keep detailed records to substantiate your deductions for meals and food served under these exceptions.

We’ll be happy to help you review your expenses and set up a system to account for items that qualify for a more generous deduction.

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Wednesday, November 1, 2017

Employer company stock: risky or worth it?


















Employees often have too much of their employer’s company stock in their 401(k) or other retirement plan. That’s because employees tend to feel like they know their companies best. Here’s the problem: they may be overlooking the risks of having too much of an investment in any one company.
 
Here are some of the risks of loading up on your employer’s stock:

  • The safe-haven effect. Overweighting investment holdings in any company minimizes diversification, exposing your portfolio to increased risk. The belief that employer shares are less risky is an illusion.
  • The one-two punch. No company is protected from economic downturns. If your company’s performance weakens, you may lose your job at the same time as its declining stock harms your retirement portfolio.
  • Lock-up periods. Some companies prohibit employees from converting the employer retirement match contributions in company stock into other investments until after a number of years. In this case, use your own contributions to diversify your holdings.
  • Forgetting risk. As you move closer to retirement, you may forget the riskiness of your employer’s stock to your portfolio. At the same time, contributions of company stock may be growing, based on higher benefit matches — just when portfolio reallocation is becoming more important.
Your goal should be to create a well-balanced portfolio that suits your age (investment horizon) and your risk tolerance. Call us for help reviewing your retirement situation.

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