Friday, September 13, 2019

Ideas to Improve Your Financial Health


No one likes to be blindsided by financial hardship. Listed here are 10 ideas to help ensure your financial situation stays healthy.
  • Create a safety net. Plan to have a minimum savings balance to cover at least three months' of expenses (ideally, this should be six to 12 months). If your reserves are light, start saving now. Even if it is a little amount, it can get you on the right track.
  • Develop a budget. At least once a year develop a basic budget. Set goals and try to hit them. If this seems overwhelming, start simple. What is coming in and what goes out each month? Becoming aware is the first step to improving your financial health.
  • Make your spouse a financial partner. If you die, does your significant other know where everything is? Can he/she pay the bills? Does he know where account numbers are? Does your spouse know who you use to help with things? If not, it is time to start talking.
  • Review your beneficiaries. Once a year review beneficiaries on all accounts. This includes retirement accounts as well as names on wills and estate plans. The legal hassle created without this review can be devastating to your surviving family. This is especially important if you had a recent life event (marriage, divorce, birth or death).
  • Maximize your benefits. Make sure you review your retirement plans to maximize any employer match in your account. Also review your plan's administrative expenses. If they are too high they can cost you thousands of dollars over your lifetime.
  • Create a disaster plan. If your home burned down or was flooded, are your important records easily accessible and protected? If not, consider creating a disaster plan. This may include placing important documents in a safe deposit box in another location than your home.
  • Review your credit report. With the recent increase in identity fraud, plan to check your credit with the major credit agencies once a year. The agencies are legally required to make their report available to you annually without charge.
  • Review your insurance plans. Periodically look at your health, life, home and liability insurance. With the legal nature of our society, you might consider the need for an umbrella policy to cover against potential litigation. But also consider flood insurance and a replacement value homeowner's policy.
  • Manage your debt. Review your use of credit cards, loans, etc. Understand your net worth (assets minus liabilities). Make progress in reducing your debt load starting with the highest interest obligations first. Is your debt lower than it was last year?
  • Plan for fun. Just because you are taking steps to improve your financial situation doesn't mean that you can't have fun. Be smart about your entertainment spending. If you are planning a vacation, research money-conscience options and have a budget that fits in with your other financial goals.
This list is by no means complete, but if you focus on the areas mentioned, your financial life will become more planned and less likely to be struck by an unforeseen surprise.
If you have questions, call us at (219) 769-3616 or email them to gward@swartz-retson.com.

IRS Email Scam


IRS Warns of New Impersonation Scam

The Internal Revenue Service (IRS) and its Security Summit have recently issued warnings about a new email impersonation scam that is spreading rapidly across the country.  Taxpayers began notifying the IRS earlier this week about unsolicited emails from imposters, including emails claiming to be sending tax filing reminders. 

The scam emails will contain links to websites that are similar in appearance to the IRS.gov website and that require the taxpayers to login to an account, using a password created by the scammers.  The account claims to have details about the taxpayer’s refund, tax return, and tax account history.  However, the account is actually a link that will infect the user’s computer with malware.  The imposters will use the malware to attempt to gain control of the taxpayer’s computer or secretly download software to track keystrokes.  This tracking can provide the scammer with sensitive information, such as passwords to websites that the taxpayer frequents. 

It is important to remember that the IRS will never contact taxpayers via email, especially regarding tax sensitive information such as refund statuses.  Likewise, the IRS will never initiate contact through text messages or social media channels.  If taxpayers receive a message from the IRS via any of these channels, they should forward the message immediately to the IRS at phishing@irs.gov.  Also, if taxpayers feel they are the recipient of a potential scam, they can call the IRS during business hours to confirm the information they received.    

These scams are similar to others in which imposters will contact taxpayers over the phone and demand immediate payment of taxes using methods such as prepaid debit cards, gift cards, or wire transfers.  Never submit payment via these methods – the IRS will first send taxpayers a bill through the mail before using other methods to collect tax due.    

If you have questions, call us at (219) 769-3616 or email them to tlynch@swartz-retson.com.

Saturday, August 24, 2019

Time to Lower Your Tax Bill


It's easy to push tax planning to the sidelines when tax laws are ever-changing and hard to understand. Here are some common (but often unfounded) reasons for avoiding tax situations, plus tips to help get past them and start paying less tax this year:
  • It doesn't make a difference. This point of view is especially problematic in years with unique situations.  Even in uneventful years, external forces like new tax laws can be managed if planned for in advance.
    • Selling a house? You can avoid taxes if primary residence requirements are met.
    • Starting a business? Choosing the correct entity can save you a bunch of taxes.
    • Getting ready to retire? Properly balancing the different revenue streams (part-time wages, Social Security benefits, IRA distributions and more) has a huge impact on your tax liability.
  • It's out of your control. Timing is important when it comes to minimizing taxes, and the timing is often in your control. Bundling multiple years of donations into one to get a deduction, holding investments over one year to get a lower tax rate, and making efficient retirement withdrawals are just some examples of prudent tax strategies that you control.
  • There's not enough money. There are tax strategies to be implemented at all income levels, not just those at the top of the tax bracket. Tax deductions are available for student loan interest, IRA contributions and others even if you claim the standard deduction. Certain tax credits (called refundable credits) will increase your refund even if you don't owe taxes. Missing any of these tax breaks can unnecessarily increase your taxes.
  • I only need help at tax time. When the standard deduction doubled in 2018, many people assumed they could kick their feet up and wait for a big refund. That assumption proved to be false for a large number of taxpayers when their refunds came in lower than expected or turned into a tax bill. Don't let this happen to you! Every year has its own set of changes and challenges that you should plan for well before tax time rolls around.
  • It's too overwhelming. Tax planning is often as simple as looking for ways to reduce taxable income, delay a tax bill, increase tax deductions, and take advantage of all available tax credits. The best place to start is to bolster your level of tax knowledge by picking up the phone and asking for assistance.
Thankfully, it's not too late to get on track for 2019. If you haven't scheduled a tax-planning meeting, now is a great time to do so.

If you have questions, call us at (219) 769-3616 or email them to tlynch@swartz-retson.com.

Insurance Tips to Protect Your Assets and Your Bank Account


Have you conducted a business insurance review lately? Changes in your business equipment, real estate holdings, the amount of inventory, and the number of employees are all good reasons to review your insurance. Here are a few policy review tips to consider:
  • Keep in regular contact with your insurance company. Keep your insurance agent apprised of what you are doing in your business. Try to meet with your agent throughout the year, and conduct a detailed annual review of your insurance needs.
  • Understand how business changes affect your policy. Figure out how your policy covers common changes, as well as other changes you know are happening soon. This involves understanding the limits and terms of your policy. You can start by asking if you're properly insured for property damage, liability coverage, health and disability, and life insurance.
  • Conduct a competitive review. Periodically conduct a competitive review of your insurance needs. Bring in at least two other insurance providers, as well as your current provider. The frequency of the review will be driven by changes in your business, the stability of your current insurance provider, and the need to understand the evolving landscape of business liabilities. A review will keep your premiums competitive, as well as help you learn about coverage holes in your current policy.
  • Identify evolving coverage risks. As the business climate evolves, so should your insurance coverage. Think about what's on the horizon. Who would have anticipated the need to cover cyber attacks and identity theft 10 years ago?
  • Review safety plans and company policies. This goes hand-in-hand with a business insurance review. Make sure your team is adhering to established employment and operations policies. Getting an insurance claim approved and maintaining reasonable premiums often depend on specific factors you can reinforce through these policies.
Finding the right level of coverage for the right price is possible, but it takes some preparation and planning. Invest some time now to review your insurance policies to save a lot of potential pain and money down the road.

If you have questions, call us at (219) 769-3616 or email them to gward@swartz-retson.com.

Elements of Good Business Partnership



Like a bundle of sticks, good business partners support each other and are less likely to crack under strain together than on their own. In fact, companies with multiple owners have a stronger chance of surviving their first five years than sole proprietorships, according to U.S. Small Business Administration data.
Yet sole proprietorships are more common than partnerships, making up more than 70 percent of all businesses. That's because while good partnerships are strong, they can be hard to make. Here are some elements that good business partnerships require:
  • A shared vision
    Business partnerships need a shared vision. If there are differences in vision, make an honest effort to find compromise. If you want to start a restaurant and your partner envisions a fine dining experience with French cuisine, while you want an American bistro, you are going to be disagreeing over everything from pricing and marketing to hiring and decor.
  • Compatible strengths
    Different people bring different skills and personalities to a business. There is no stronger glue to hold a business partnership together than when partners need and rely on each other's abilities. Suppose one person is great at accounting and inventory management, and another is a natural at sales and marketing. Each is free to focus on what they are good at and can appreciate that their partner will pick up the slack in the areas where they are weak.
  • Defined roles and limitations
    Before going into business, outline who will have what responsibilities. Agree which things need consensus and which do not. Having this understanding up front will help resolve future disagreements. Outlining the limits of each person's role not only avoids conflict, it also identifies where you need to hire outside expertise to fulfill a skill gap in your partnership.
  • A conflict resolution strategy
    Conflict is bound to arise even if the fundamentals of your partnership are strong. Set up a routine for resolving conflicts. Start with a schedule for frequent communication between partners. Allow each person to discuss issues without judgment. If compromise is still difficult after discussion, it helps to have someone who can be a neutral arbiter, such as a trusted employee or consultant.
  • A goal-setting system
    Create a system to set individual goals as well as business goals. Regularly meet together and set your goals, the steps needed to achieve them, who needs to take the next action, and the expected date of completion.
  • An exit strategy
    It's often easier to get into business with a partner than to exit when it isn't working out. Create a buy-sell agreement at the start of your business relationship. This should outline how you exit the business and create a fair valuation system to pay the exiting owner. Neither the selling partner nor the buying partner want to feel taken advantage of during an ownership transition.
If you have questions, call us at (219) 769-3616 or email them to gward@swartz-retson.com.

Time to Consider If It Is Worth Amending Your Return



Whether it makes sense to amend your return depends on which of these situations you're in:

If you owe the IRS
If you discover an omission on your tax return that results in you owing additional tax, you need to correct it with an amendment and provide the tax due.
Don't delay if this is your situation. If the IRS discovers the omission before you do, they may add interest and penalties to your bill.

If you are due a refund
If you find a mistake that should result in getting a larger refund check, you can claim it by filing an amended return. But there are several reasons it may not be worth it.
  • It may open a can of worms. In many cases, amending your federal return means also amending your state returns. Multiply the hassle if the error spans across two or more years.
  • It puts a spotlight on you. While your original return may have passed through the IRS's automated system without a hitch, now that it's amended you can virtually guarantee it will get a closer look. If you have anything else in your return that can trigger an audit, like business deductions, charitable donations, or other credits, this can be a concern.
  • It may take a long time to get a refund. The IRS tries to process your original return within three weeks. No such luck for an amended return. It can take several months to get an amended return processed and see that extra refund, even as long as 1½ years in rare cases.
  • It stretches out the audit window. The IRS generally has a three-year window to audit returns and request changes. When you file an amendment, you extend the audit time frame.
  • It may be too late. Depending on when you notice an error and how far it goes back, it may be too late. The deadline to file an amendment is generally the later of three years after the original return was filed, or two years after the tax for that year was paid.
Ultimately you have to weigh the extra money you could get from amending against the potential problems it could cause. If it's worth it, get an amendment filed.

Call to get help with an amendment or if you have other tax questions.

If you have questions, call us at (219) 769-3616 or email them to tlynch@swartz-retson.com

Friday, June 28, 2019

How You Can Learn from High Profile Tax Scandals


How You Can Learn from High Profile Tax Scandals

The recent college admission scandal involving Lori Laughlin (who played Aunt Becky in the Full House TV series) and others is shedding light on just one way people allegedly cheat on their taxes. Here are examples of some famous people in tax trouble with the IRS and helpful hints to make sure it doesn't happen to you:
·        Lori Laughlin and questionable charitable donations. In this case, the IRS would investigate whether payments deducted as charitable contributions on her tax return were really charitable contributions. Regardless of how the legal charges shake out, Loughlin is looking at a large tax bill if the charity she contributed to is stripped of their non-profit status.
Helpful hint: Charitable giving must be to legitimate charitable organizations, for legitimate purposes, and must be reduced by any value received in return.
·        Al Capone and his illegal earnings. After years of bribing and wriggling his way out of violent crime charges, Capone was charged with 22 counts of tax evasion for not reporting income on illegal activities. He was sentenced to 11 years in prison - some of which were served at Alcatraz prison in San Francisco.
Helpful hint: ALL income - even if obtained illegally - is taxable.
·        Wesley Snipes decided not to file his taxes. In 2008, actor Snipes was convicted for not filing tax returns from 1999 to 2001. Among his many arguments, Snipes used the tax protester theory claiming domestic income is not taxable. After jail time, Snipes' offer in compromise to lower his $23 million tax bill request was shot down by the IRS.
Helpful hint: Exotic tax schemes are actively monitored by the IRS. If it seems too good to be true, it probably is too good to be true and requires a second opinion.
·        Leona Helmsley faked her business expenses. Helmsley, A famous real estate mogul in the 1980s, had more than $8 million of renovations to her private home billed to one of her hotels so she could deduct the expense on her taxes. After being convicted, Helmsey had to pay back the $8 million and served 18 months in prison.
Helpful hint: Separate business expenses from personal expenses. Open separate bank accounts and never intermingle expenses. The IRS is quick to disallow deductions when personal expenses and business expenses are mixed together.
·        Pete Rose hid his "likeness" income. Many famous athletes go on to sell autographs, memorabilia and get paid for appearances after they retire from their sport. Rose was no different, but he opted not to report the $354,968 he earned over a four-year period. The result was five months in prison and a $50,000 fine in addition to having to pay back the taxes he tried to avoid.
Helpful hint: Don't attempt to hide income. With less and less businesses using cash payments, the IRS now can use matching programs to quickly find underreporting problems.
While seeing well-known celebrities in the press for tax trouble makes for interesting reading, there are useful tax lessons for all of us. It provides an opportunity to see how IRS employees think and what they are reviewing.

If you have questions, call us at (219) 769-3616 or email them to tlynch@swartz-retson.com.