Using Your 401(k) Plan to Save

You can reduce taxes and save for retirement by contributing to a tax-advantaged retirement plan. If your employer offers a 401k or Roth 401k plan, contributing to it is a taxwise way to build a nest egg. If you’re not already contributing the maximum allowed, consider increasing your contribution rate between now and year end. Because of tax-deferred compounding (tax-free in the case of Roth accounts), boosting contributions sooner rather than later can have a significant impact on the size of your nest egg at retirement. With a 401k, an employee elects to have a certain amount of pay deferred and contributed by an employer on his or her behalf to the plan. The contribution limit for 2019 is $19,000. Employees age 50 or older by year...

Year-End Tax-Saving Tools for Your Business

At this time of year, many business owners ask if there’s any year end tax saving tools they can implement. Under current tax law, there are two valuable depreciation-related tax breaks that may help your business reduce its 2019 tax liability. To benefit from these deductions, you must buy eligible machinery, equipment, furniture or other assets and place them into service by the end of the tax year. In other words, you can claim a full deduction for 2019 even if you acquire assets and place them in service during the last days of the year. The §179 deduction Under §179, you can deduct (or expense) up to 100% of the cost of qualifying assets in Year 1 instead of depreciating the cost over a number of...

Protecting Against International Trade Fraud

The U.S. economy depends on import and export markets to run as designed. After all, revenue from trade tariffs and duties contribute $30 billion annually to federal government coffers. Unfortunately, fraud regularly throws a wrench in the works of global trade, and individual businesses suffer. Your company might, for example, lose money if a seller ships substandard goods or it could get fleeced if it turns out that a shipment doesn’t exist.  Be vigilent in protecting against international trade fraud. The problem with letters of credit To facilitate international trade, buyers and sellers often rely on documentary letters of credit (DLCs). For a fee, banks issue DLCs that pay sellers from buyers once the specified terms of the DLC are fulfilled. These documents theoretically shift risk to...

Net Investment Income Tax

The Tax Cuts and Jobs Act (TCJA) reduced individual income tax rates, but it left the 3.8% net investment income tax (NIIT) in place. It’s important to address the NIIT in your estate plan, because it can erode your earnings from interest, dividends, capital gains and other investments, leaving less for your heirs. Net Investment Income Tax: How it works The NIIT applies to individuals with modified adjusted gross income (MAGI) over $200,000. The threshold is $250,000 for joint filers and qualifying widows or widowers and $125,000 for married taxpayers filing separately. The tax is equal to 3.8% of 1) your net investment income, or 2) the amount by which your MAGI exceeds the threshold, whichever is less. Suppose, for example, that you’re married filing jointly and you...

C to S Corporation Conversions

The right entity choice can make a difference in the tax bill you owe for your business. Although S corporations can provide substantial tax advantages over C corporations in some circumstances, there are plenty of potentially expensive tax problems that you should assess before making the decision to initiate a C to S corporation conversion. Here’s a quick rundown of four issues to consider: (1) LIFO inventories C corporations that use last-in, first-out (LIFO) inventories must pay tax on the benefits they derived by using LIFO if they convert to S corporations. The tax can be spread over four years. This cost must be weighed against the potential tax gains from converting to S status. (2) Built-in gains tax Although S corporations generally aren’t subject to tax, those that were...

How to Have More Willpower

As posted to the FightMediocrity YouTube Channel on 6/30/15 (Run time: 4 min, 39 sec) In this thought provoking clip, FightMediocrity provides a quick review and recommendation of "The Willpower Instinct" by Kelly McGonigal.  The book reports that 3 scientifically proven ways to have more willpower are: Get enough sleep Meditate Do important things first (This is Blog Post #670) FightMediocrity is dedicated to fighting mediocrity through big ideas. The artist picks some of his favorite books in self-improvement and self-help that he has found useful on his personal development journey, animates them, and shares them with his audience....

How to Fix a Broken Trust

There are good reasons why estate planning advisors recommend you revisit and, if necessary, revise your estate plan periodically: changing circumstances, including family situations and new tax laws. While it’s relatively simple to change a beneficiary, what if an irrevocable trust no longer serves your purposes? Depending on applicable state law, you may have options for how to fix a broken trust. Reasons why a trust can break A trust that works just fine when it’s established may no longer achieve its original goals if your family circumstances change. If you divorce, for example, a trust for the benefit of your spouse may no longer be desirable. If your children grow up to be financially independent, they may prefer that you leave your wealth to their children....

Help Stop Elder Financial Abuse

It’s one of the most difficult types of fraud to unearth. But it doesn’t directly affect businesses or the average consumer — in large part because its victims rarely report it. In fact, they’re often prevented from doing so by perpetrators.  What is it? Financial abuse of seniors, or elder fraud. Many thousands of Americans are victimized each year and some observers fear these crimes are becoming more widespread. But you can help stop elder financial abuse. Learn the signs and, as the saying goes, if you see something, say something. Vulnerable targets Older individuals with retirement savings, accumulated home equity and other significant assets make appealing targets for unscrupulous family members, caregivers, financial advisors, fiduciaries and scam artists who insinuate themselves into their victims’ lives. Seniors could...

Self-Directed IRA Pitfalls

Traditional and Roth IRAs can be powerful estate planning tools. With a “self-directed” IRA, you may be able to amp up the benefits of these tools by enabling them to hold nontraditional investments that offer potentially greater returns. However, there are self-directed IRA pitfalls that can lead to unfavorable tax consequences. Consequently, you need to handle these vehicles with care. Estate planning benefits IRAs are designed primarily as retirement-saving tools, but if you don’t need the funds for retirement, they can provide a tax-advantaged source of wealth for your family. For example, if you name your spouse as beneficiary, your spouse can roll the funds over into his or her own IRA after you die, enabling the funds to continue growing on a tax-deferred basis. If you name...

3 Last Minute Tips that May Help Trim Your Tax Bill

If you’re starting to fret about your 2019 tax bill, there’s good news — you may still have time to trim your tax bill for 2019. Three strategies are available that may help you cut your taxes before year-end, including: 1. Accelerate deductions/defer income Certain tax deductions are claimed for the year of payment, such as the mortgage interest deduction. So, if you make your January 2020 payment this month, you can deduct the interest portion on your 2019 tax return (assuming you itemize). Pushing income into the new year also will reduce your taxable income. If you’re expecting a bonus at work, for example, and you don’t want the income this year, ask if your employer can hold off on paying it until January. If you’re self-employed,...