Tax season is once again in full swing. While many concerned taxpayers file tax returns to meet the required deadline, criminals work harder to cash in and take advantage of the hectic tax season. Tax fraud remains a growing concern nationally, and counterfeit scams cost millions of dollars. Individuals who take a proactive approach can deter fraud and protect their identity, information, and their finances. Here are a few recent scams catching the watchful eye of the IRS.

TAX PREPARATION SCAMS

The IRS just released notice IR-2019-09 to alert taxpayers of unscrupulous tax preparers. Deceitful tax preparers file erroneous tax returns for many unknown taxpayers. The law requires all preparers who receive payment to prepare federal tax returns to have a valid Preparer Tax Identification Number (PTIN). The tax preparer must include their PTIN and sign the return. For e-filed tax returns, a dishonest preparer will omit his electronic signature.

Additionally, they may falsify tax information to increase the refund while directing the refund into their bank account. Taxpayers must review their tax returns for accuracy of income and deductions. Ensure the tax preparer signs the return and includes their PTIN. Make sure the bank account and routing numbers are correct. The IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications provides an excellent resource to locate established tax preparers with the IRS.

CHARITABLE GIVING SCAMS

Counterfeit websites disguise themselves as other well-known, established charities to deceive generous individuals into donating money to a dire cause. Additionally, some individuals receive solicitations from fraudulent charities promising a nice tax deduction in return for your donation. Please don’t fall victim to their schemes. Donors can prevent thousands of dollars from falling into the wrong hands. The IRS provides a tool to help avoid charitable giving scams. Donors can verify if a charity is legitimate by utilizing the IRS search tool Tax Exempt Organization Search. Never give to a charity that solicits a donation without first verifying the authenticity of their organization.

EMAIL PHISHING SCAMS

In IRS notice IR-2018-226, the IRS alerts taxpayers to a recent spike in email phishing scams. While fraudulent emails and phishing scams have been around a while, data thieves continue working diligently to improve new tactics to steal valuable information. Emotet is the infected malware of choice in many email scams, and Emotet remains well-known as the most damaging and expensive to fix. Many of these scam emails display tax account transcripts in the email’s subject line and include infected attachments with similar wording. These emails appear legitimate. They often disguise themselves as representatives of banks, financial institutions, and the IRS. The IRS logo and other well-known bank logos seem real, and many unsuspecting individuals open the infected email attachment. The IRS does not contact individuals through email. The IRS warns individuals not to open suspecting emails. The IRS remains diligent in combating fraud. If you suspect a suspicious email, you can also forward the email to phishing@irs.gov.

After a bit of political posturing in December, the $900 billion Consolidated Appropriations Act of 2021 (2021 CAA) was signed into law by President Trump as the COVID-19 pandemic continues to impact employers and employees.

Here’s a quick recap of five key highlights:

Stimulus Checks: The new law authorized a second round of $600 checks for people with
income that meets the criteria. The checks start to phase out for individuals who earned
at least $75,000 in 2019 and $150,000 for joint filers.1

Unemployment Benefits: The law provides up to $300 per week in enhanced benefits
through March 2021. The benefits extend to self-employed individuals and gig workers.2

Student Loan Repayment: The 2021 CAA extends the provision that allows employers to
repay up to $5,250 annually towards an employee’s student loan payments. The
payments are tax-free to the employee.3

Small Businesses: The 50% limit on the deduction for business meals has been lifted.
Business meal expenses after December 31, 2020, and before January 1, 2023, may now
be fully deductible. Please consult your tax, legal, or accounting professional for more
specific information regarding this provision.4

PPP Loans: The new law contains $284 billion in relief for a second round of Payment
Protection Program loan funding. Businesses with 300 or fewer employees may be eligible for a second loan. “Second-draw” loans are available through March 31, 2021.5

As 2021 gets underway, expect some additional guidance from regulators on 2021 CAA.
Our office will keep an eye out for updates and pass information as it becomes available.

As we look ahead to a new year, we think of our goals and priorities. Some of these goals can involve getting an Estate Plan together. If you want to leave part of your estate to your stepchildren, you must make this specification in your will. If a stepparent dies without a will, the children will not get any part of the estate even if the deceased stepparent wanted them to. Stepchildren do not have automatic inheritance rights possessed by adopted and biological children.

Legally speaking, stepchildren are not entitled to any inheritance unless they are specifically named on the will. This fact can be traced back to the colonial days when America was under British common law. Due to the prevalence of negative stepparent stereotypes at the time, the centuries-old legal system did not encourage strong legal relationships between stepchildren and stepparents.

Blended Families and Estate Planning


What are blended families? The term blended family refers to a family situation where either the husband, wife or both, have children from a previous marriage. Blended families can take any of the following forms.:
– Families where both spouses have children from an earlier marriage.
– A family where the husband and wife have children from previous marriages and biological children as a couple.
– Married couples where either the husband or the wife have children from an earlier marriage.

Blended families often have to deal with complex issues when it comes to estate planning. Problems can arise between the parents or the children and their spouses. Some of the challenges individuals from these families face include:
– Scuffles over the division of responsibilities or authority.
– The need to protect their estate from previous spouses.
– Potential delaying of the stepchildren’s asset perhaps until the death of the parent’s spouse.
– The possibility of stepchildren being disinherited by the living spouse.

Estate Planning Asset Protection Strategies to Protect Stepchildren

The number of blended families continues to rise as divorce rates in first marriages, and remarriages grow. On average, about 50 percent of marriages and 60 percent of remarriages end in divorce in the US. With the help of an estate planning attorney, these families can develop some form of asset protection to make sure that the surviving offspring remains a part of their estate.

Stepparent Will

The stepparent should make sure they have a will that specifically names the stepchild/children as a beneficiary. If a stepparent dies without a will, his/her estate will be inherited by the legal spouse or the closest living relative but not the stepchild.

Irrevocable Life Insurance Trust (ILIT)

ILITs allow stepparents to provide for their children through life insurance and use the remainder to provide for their spouse. The parent purchases a life insurance policy using the child’s name and pays the premium for the rest of his/her life. The child will receive the inheritance upon the death of the parent. An irrevocable life insurance trust is an excellent way to ensure that stepchildren are not disinherited.

Bloodline Trusts

A bloodline trust is intended to benefit your child and his/her offspring. The trust protects a child from creditors and former spouses by keeping the money in the family. The child is the trustee.



Sources

http://www.huffingtonpost.com/news/us-divorce-rate/
http://www.forbes.com/sites/rbcwealthmanagement/2015/06/23/estate-planning-tips-for-your-blended-family/#9dc54944f4a2
http://www.n-klaw.com/the-blended-family-dilema/
http://www.kwgd.com/estate-planning-for-blended-families

A few weeks into a New Year and many think about various aspects of their lives. One of the primary areas that is commonly reviewed is personal finance. If you are thinking about retiring within the next few years or longer, you may want to create a resolution or two so that you can plan better for your non-working years. However, some people believe that it is simply too late for any plan to be effective or beneficial. While it is better to start preparing for non-working years early in your adult years, starting now is better than not making any preparations. These are some areas you can resolve to address soon.

Set Retirement Goals

Everyone has some dream about their life after they stop working in a full-time position. For some, the goal is to continue working on a part-time basis, others want to travel, and some may want to be closer to family. A primary resolution should be to define your goals. Without specific goals, it is not possible to plan appropriately for the future. After all, maintaining your lifestyle if you travel frequently may be much more expensive than if you stay close to home.

Eliminate Debt

Another resolution should involve eliminating debt. Debt cannot usually be paid off quickly, so resolve to create a feasible debt reduction plan. When you pay debts off now, you can reduce the amount of income needed after you retire. For example, if you pay off your mortgage, car loans, and credit card balances, you may be able to live on several thousand dollars less each month. By reducing the income required to live comfortably, you can feasibly retire with less money saved up.

Prepare a Budget for Retirement

In addition to making a plan to eliminate debt from your life over the next few months or years, you also need to prepare a budget for your non-working years. This budget will include estimated income from all sources after you quit working. It will also include reasonable estimates for expenses. Your planning should focus on cost-of-living adjustments related to inflation. If you plan to relocate to a new town after you retire, your budget should be realistic for that specific area.

Update Insurance Coverage

Many people who are preparing for the future fail to consider changing insurance needs after leaving the workforce. As you get closer to retiring, determine if you will continue to need life insurance. Analyze your need for different types of medical insurance and long-term care insurance. Each retiree is in a different position, so there is no catchall rule regarding how much or what types of insurance you need to have. Remember to update your budget with the premiums for these various insurance products. It is also wise to consider deductibles associated with each policy when determining how much money you will need.

Some people are so discouraged by their late start planning for this life stage that they throw in the towel. However, you can see that your initial efforts in each of these areas can help you get on the right path. Even though you think that you may be far behind others who are your age, you may be in a better position than you appear to be at first glance. When you make these crucial resolutions and start acting on them quickly, you can move forward with a confident footing as you approach your non-working years.

The new year brings about a time of reflection for many. One of the primary areas for review is personal finance. If you are thinking about retiring within the next few years, you may want to create a resolution or two to help you better prepare for your non-working years. However, some people believe it is too late for any plan to be useful or beneficial. While it is better to start preparing for non-working years early in your career, starting now is better than not making preparations at all. Read on for some of the areas you can resolve to address in the near future.

Set Retirement Goals

Everyone has some vision for their life after they stop working in a full-time position. For some, the goal is to continue working part-time; others want to travel or be closer to family. A primary resolution should be to define your goals. Without specific goals, it is not possible to plan appropriately for the future. After all, maintaining your lifestyle if you travel frequently may be much more expensive than if you stay close to home.

Eliminate Debt

Another resolution should involve eliminating debt. Debt cannot usually be paid off quickly, so resolve to create a feasible debt reduction plan. When you pay debts off now, you can reduce the amount of income needed after you retire. For example, if you pay off your mortgage, car loans, and credit card balances, you may be able to live on several thousand dollars less each month. By reducing the income required to live comfortably, you can feasibly retire with less money saved up.

Prepare a Budget for Retirement


In addition to making a plan to eliminate debt from your life over the next few months or years, you also need to prepare a budget for your non-working years. This budget should include estimated income from all sources after you quit working, reasonable estimates for expenses, and focus on cost-of-living adjustments related to inflation. If you plan to relocate to a new town after you retire, your budget should be realistic for that specific area.

Update Insurance Coverage

Many people who are preparing for the future fail to consider changing insurance needs after leaving the workforce. As you get closer to retiring, determine if you will continue to need life insurance. Analyze your need for different types of medical insurance and long-term care insurance. Each retiree is in a different position, so there is no catchall rule regarding how much or what types of insurance you need to have. Remember to update your budget with the premiums for these various insurance products. It is also wise to consider deductibles associated with each policy when determining how much money you will need.

Some people are so discouraged by their late start planning for this life stage they simply throw in the towel. However, you can see that your initial efforts in each of these areas can help you get on the right path. Even though you think that you may be far behind others who are your age, you may be in a better position than you appear to be at first glance. When you make these crucial resolutions and start acting on them quickly, you can move forward with a confident footing as you approach your non-working years.

After a stressful 2020, you’re thinking more-and-more about retirement. While the bulk of your retirement prep work and heavy lifting has been completed by the time you’re a couple of years from retirement, there are still a few boxes you’ll want to check off before finally saying adios to the workforce. Let’s go through them.

1. Social Security Decision
You’ll need to decide when to collect Social Security benefits. The earliest age is 62. Unless you’re retiring early and need the benefits to help cover expenses like health insurance, it’s advantageous to wait. At 62, your benefits would be reduced by 25% or more. You won’t collect 100% of your benefits until you’re 66 or 67, depending on what year you were born. When you wait to collect, keep in mind that benefits increase by 8 percent/per year up until you’re age 70.

2. Get Your Finances Simplified
Do you have multiple brokerage accounts, savings accounts, checking accounts, 401(k)s, IRAs, and other retirement savings accounts? Perhaps, you’ve lost track of an account?
First, simplifying and consolidating your various small financial accounts into a larger one will make it easier for your heirs to step in to control if you had a medical emergency, needed long-term care, or passed away.

Second, you can reduce paperwork, possibly save some cash, and better keep track of your set income to expenses ratio by having everything neatly confined. For example, aggregation with a single provider can offer some economies of scale-like cheaper expense ratios.
Lastly, if you’ve lost track of an account, then you’re missing a piece of your financial pie that could make a big change in how retirement tastes. missingmoney.org and unclaimed.org are good places to start tracking lost and unclaimed funds.

3. Give Your Portfolio A Health Checkup

Ideally, your portfolio at this point should be moderate-risk. It should be about half and half stocks and bonds. If the stock market is causing you any worry, then consider a move to more steady stock funds like VEIPX or TWEIX, who’ve both held up well in previous downturns.
A bucket system may help protect you against your biggest retiree risk – forced sells during plunges. During plunges, the bucket system allows you to have enough cash and bonds that you won’t be forced into selling stocks to pay your debts. You’ll divide your nest egg into three buckets:
• Bucket one – cash for living expenses not otherwise covered in the next few years.
• Bucket two – short and intermediate-term bonds to cover the money you’ll need in the first ten years of retirement.
• Bucket three – diversified stocks for money needed in the distant future.

4. Make A Plan With HR

Schedule a time to speak with your company’s human resources department about your retirement. Topics you’ll want to ask about include:
• Are unused vacation days paid upon retirement?
• Is receiving profit-sharing payouts, bonuses, 401(k) match, or any other income aspect impacted by your planned retirement date?
• If retiring before Medicare-age, what retiree health benefits are offered?
• If a 401(k) is left as-is versus rolling it over into an IRA, can distributions still be taken? How? Is there a fee?
• If a pension is available, what are the options for payout?
One note on lump-sum pensions to keep in mind is that extending your retirement may not increase your pension. Lump-sum pensions are calculated based on interest rates. The higher the interest rate, the lower the pension. Extending your retirement when interest rates are rising can actually result in your pension going down, not up.

5. Study Medicare Closely

Medicare is a difficult beast to navigate, and the sales pitches you get from supplement insurers only adds to the confusion. So, you’ll want to start studying now, understanding how it works, what coverage gaps exist for you, and what you need versus don’t need in supplements. Here are some highlights you’ll want to consider:
• Upon turning 65, Social Security beneficiaries are automatically enrolled in Medicare parts A (hospital care) & B (doctor and outpatient visits.) If you’re delaying your SS payment, then it’s up to you to enroll on your own.
• If delaying your SS claim and still covered by your employer’s health plan, then you’ll likely find it beneficial to go ahead and sign up for part A at age 65 since there’s usually not a premium.
• You may want to opt-out of part B since it charges you a monthly premium for service.
You may also want to opt-out of part D, which covers prescriptions. The caveat here is your employer’s offered insurance is as good as what Medicare offers. If not, and you select to opt-out, then you’ll face penalties when you sign up in the future.
• To ensure you’re not left without coverage, plan to sign up for part B around six weeks prior to retirement. You have eight months after leaving your job to sign up for part B without penalty.
• Be deciding if you want Medicare Advantage. This is basically a combination of parts B & D with a supplemental Medigap plan to cover the copayments, deductibles, and other traditional healthcare costs that Medicare doesn’t include. These plans provide private insurers medical and drug coverage within a network, meaning you’ll need to carefully research your plan options and determine if your preferred health care providers are in the offered network of a plan.

6. Should An Annuity Be On The Agenda?

Without a traditional pension, an immediate annuity might be a good option for you. A common strategy is to calculate fixed monthly expenses – car notes, mortgages, insurances, utilities – and buy an annuity that gives a congruent payment. Basically, you give an insurer a lump sum of money in exchange for them paying you a monthly amount each month for either the remainder of your life or a specified amount of years. If you choose a joint-and-survivor annuity, that payment continues through your spouse’s life should he/she outlive you.

Another strategy is a deferred income annuity. Ideally, these are bought at least 10 to 15 years out from retirement since they take 10 years to mature. However, if you’re taking an early retirement or expect your expenses to be greater in the next decade, a deferred annuity may be a good option. They’re much less costly than an immediate annuity, but they also have a major risk versus reward. Your heirs get nothing if you pass away before payments begin. The fix is to opt for return-of-premium benefits, but this reduces your payout quite a bit.
In closing, the finish line is just around the corner, but now isn’t the time to slack just yet. You’ll want to make sure these important boxes are checked so that you can retire in the peace and confidence you’ve worked all these years to afford.

This year has forced some to think about retiring early. When it comes to retiring early, some of the benefits are obvious! You get to live your life without the constraints of work and can pursue your own interests. But there are other good reasons for retiring early, and there are some reasons why retiring early is not the best idea.

Your Dedication is Gone

One of the right reasons to retire early is that you are simply not dedicated to working anymore. When you are no longer emotionally interested in working, your performance deteriorates, and your company suffers.

There are good reasons for retiring early, and there are some reasons retiring early is not the best idea.

Working Took its Toll

In some professions, such as construction and law enforcement, the job’s physical and emotional demands can become too much over time. After a few years in a high-risk profession, your body and mind have simply had enough, and it is time to go home and rest.

Your Finances Become More Flexible

Most people do not realize how expensive it is to work until they are no longer working. When you work any job, you incur expenses such as wear and tear on your car, transportation expenses such as gas or bus passes, work clothing costs, daycare, and miscellaneous medical costs for work-related injuries. If you have planned your finances to retire early, you will find that your money goes much further when you are not working.

Your Health Could Suffer

For some people, retiring early means abandoning the daily physical activity working required and giving up a big piece of their identity. Retiring early can cause physical and mental problems that could become very serious over time.

You Lose Your Social Circle

After years of working, you tend to take for granted the notion that you will see most of your friends at work five days out of the week. Even people who think that the people they work with are only acquaintances suddenly find that the loss of the social circle they developed at work is devastating.

You Didn’t Plan Well

When you retire before the age of 65, you risk losing out on health insurance. Medicare automatically kicks in for every American when they turn 65, but what would you do until that age? Did you plan your retirement finances right, or will you run out of money? Many people forget to take inflation into account when they plan their retirement, which makes retiring early financially dangerous.

There are two sides to every story, and that includes the story that goes with retiring early. The idea of walking away from work before the age of 65 can sound appealing, but there are plenty of variables to consider before you make that decision. If you want to retire early, talk about it with your family, and then we will get together and check if you have structured your savings properly to live without a paycheck for the rest of your life.

While tapping into your 401(k) is not the first choice that you should make, it is
sometimes unavoidable. During the most recent economic crisis, you may have
needed to withdraw from your retirement funding in order to make ends meet or
cover certain types of expenses. The good news is that you can recover from this in
the long run with some prudent actions right now.

The first thing you can do is to immediately begin contributing the maximum
amount allowable to your 401(k). This will not only maximize your tax savings, but it
can also take advantage of the employer match. In fact, when you do not grab every
penny that you can from your employer, you are leaving money on the table. Of
course, there are limits to the amount that your employer will match.

While your 401(k) investment options are limited to what your employers offers,
there are ways to play catch-up to make up for some of what you lost if you had to
withdraw from your account.

You can periodically shift between bonds and stocks depending on your feeling
about the market. For example, if you are using an 80-20 split between stocks and
bonds, you can go 90-10 when the market has dropped, so you can try to time the
market. Then, you can reallocate your portfolio when the market rises again.
However, we caution against doing that with more than a small part of your
portfolio.

If you tapped into your 401(k) by taking a loan, you should pay it back as quickly as
possible to recover account value. When you have a 401(k) loan outstanding, that
money is not invested in the stock market and earning returns. The hope is that you
are able to pay the money back as opposed to a straight withdrawal so you can
avoid having to pay taxes on the money you took out of your account.

Finally, another thing that you can do to get your retirement plan back on track is to
take advantage of the ability to make catch-up contributions to your 401(k) when
you turn 50. The law allows you to give up to make a special contribution beyond
the money that you are already allowed to set aside. For 2020, this amount rises to
$6,500. While you may not receive an employer match on this money, it is a way to
contribute additional money to your retirement from your pre-tax dollars. When you
take advantage of catch-up contributions each year until retirement, it could add
hundreds of thousands of dollars to your nest egg.

Before you take money out of your 401(k), you should have a plan for getting your
retirement back on track. You will need to make sure that you are disciplined and
return to saving at the first possible opportunity. The most important thing to
remember is that a dollar today grows several times over thanks to the power of
compounding. To the greatest extent possible, you do not want to miss out on that.
I am are here to help guide you to a plan that fits your desired future. Call or Email
me any time!

Checking Your Credit Score

by Suzanne Powell

A healthy credit score and an accurate credit report are key to accomplishing important financial milestones like buying a home. You can check both by obtaining a free copy of your credit report from one of the credit bureaus. If after receiving your credit report you notice inaccurate or outdated information, you need to dispute the information right away. You can do this with the credit bureau or directly with the reporting business. The process could take a bit of time, but it’s well worth doing especially when it comes to your financial health.

https://money.com/get-items-removed-from-credit-report/

Even during difficult financial times, opportunity can come knocking at your door. There is very little doubt that the current COVID19 pandemic has wreaked havoc on the U.S. economy, affecting almost every individual in its path. With that said, certain events have made 2020 the year to strongly consider converting any eligible investment accounts into a Roth Individual Retirement Account? 

Does a Roth Conversion Make Sense for Retirees? 

 Under normal circumstances, the conversion of a traditional IRA to a Roth IRA would make little sense for retirees with other sources of income. They would be required to pay taxes on the conversion amount as they take pretax dollar contributions and convert them into a Roth IRA, where contributions usually are taxed upfront with no tax obligation upon withdrawal. 

 Thanks to the CARES Act, a waiver has been issued for retirees, waving the requirement for the mandatory retirement distributions they would have to take in 2020. They can use that waiver as an opportunity to convert their normal annual distributions from other IRAs and 401K accounts into Roth IRA contributions without having to pay the taxes normally associated with doing so. That adds to tax savings on the amount converted based on the individual’s applicable tax rate for 2020. 

How High Earners Can Benefit From Roth Conversions 

 Under normal circumstances, a Roth investment would offer little value to high earners. Anyone making over $139,000, or $206,000 if married and filing jointly, would not be eligible to benefit from a direct investment in a Roth IRA. This rule also applies to anyone who has no reported income. 

 However, there are a couple of ways high earners can benefit from a Roth conversion in 2020. First, it’s worth noting that President Donald Trump signed a tax bill in 2017 that slashed U.S. tax rates to its lowest levels in decades. This offers high earners an opportunity to take the tax hit on conversions at 2020 rates, knowing the future income they will earn from their Roth investments will be tax-free when taking distributions during retirement. 

 The benefit will be realized if tax rates are higher in subsequent years, which is entirely possible if Trump loses the 2020 election. With the country closing in on $27 trillion in National Debt, a new administration would undoubtedly consider increasing tax rates across the board. That would leave 2020 as the last year a high earner could take advantage of current tax rates under this particular scenario. 

 Second, there is a “trick” high earners can use to get access to a Roth IRA. By law, there are no current income restrictions on contributions someone can make to a traditional IRA. There are also income limits or earnings requirements related to Roth conversions. Strategically, they could invest in a traditional IRA and subsequently convert that amount to a Roth. That would leave them with future earnings that would not be subject to income tax. Investment experts refer to this strategy as a “backdoor” Roth IRA. 

Conclusion 

As indicated in the opening paragraph, we are living in extraordinary times. As an investor preparing for retirement, it is incumbent on you to stay abreast of opportunities that might arise to give you certain tax advantages. 

 As Congress contemplates how to keep the U.S. economy from flatlining, there will likely be more favorable tax legislation coming out in the next few months. Under the right circumstances, investment options like Roth IRAs might become more appealing. This is the time to keep your eyes open for good opportunities to take advantage of difficult times. 

Website designed & developed by Agent Refined.