RgKAdmin14, Author at Robert J. Kratz & Co.

Taxpayers Beware – Plan Now for 2023 or Pay Later

May 07 2023 RgKAdmin14 Tax Tips 0 comments

Procrastination is easy, especially when it comes to summertime tax planning. Waiting to implement strategies to reduce your 2023 tax obligations could cost you money. Here are some suggestions to help jumpstart your midyear review:

Safeguard your Deductions

Ensure you can take deductions by keeping great records throughout the year. You’ll need proof if you want tax breaks for things like childcare expenses, charitable contributions, gambling losses, vehicle costs and travel expenses. So create a system to keep track of these expenses.

Save more for Retirement

You can save more for retirement in 2023 thanks to inflation increasing annual contribution limits. You still have time to increase the amount you set aside over the remainder of 2023. This year you can deposit up to $22,500 in your 401(k) and $6,500 into your IRA (additional catch-up contributions apply if you’re 50 or older). You can also contribute to both a 401(k) and an IRA, though tax deductibility on IRA contributions may be limited depending on your income.

Be Tax-savvy about School Savings

If you’re setting aside money in a taxable account to pay for your child’s school expenses, you could realize tax savings by opening a 529 education savings account. The sooner you do this, the sooner your earnings will start growing tax-deferred. Your earnings will also generally be tax-free when withdrawals are used for qualified education expenses.

Adjust your Withholdings and Estimated Payments

If you haven’t already, update your withholdings and estimated tax payments to reflect any changes needed since last year. Updates may be in order if you experience a big life event, such as marriage, divorce or a new job. Overpaying your 2023 tax reduces the cash you have on hand throughout the year, and underpaying can lead to penalties and interest.

This blog provides summary information regarding the subject matter at the time of publishing. Please call our office at 610-296-2500 with any questions on how this information may impact your situation. This material may not be published, rewritten, or redistributed without permission. All rights reserved.

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GREAT MONEY HABITS TO PRACTICE

April 16 2023 RgKAdmin14 Others 0 comments

Tax season is over and now is an excellent time to develop and maintain exceptional money habits can that can help you lay the foundation for achieving your financial goals. Here are some ideas.

Establish a budget and review it at regular intervals.

Create a workable budget every year then set aside time to review your budget periodically. This will help you think critically about where your money is going and help you eliminate old, destructive money habits.

Calculate your net worth.

Your net worth is an indicator of your financial health and how you manage your money. To calculate your net worth, add all your money and assets, and then subtract the total amount you owe to others. The result is your net worth. Often this result is negative due to things like student loans, high credit card balances, or underwater debt (e.g. you owe more on your car than it is worth). So don’t worry about the result, just know what your net worth is so you can improve it over time. Like reviewing your budget, a regular check-in on your net worth allows you to think more about your finances and take the necessary action to improve it.

Use sinking funds to plan.

A sinking fund is an account where money is set aside to repay debt or replace a wasting asset (think a car that loses value over time). So create a sinking fund in your budget. Then decide how to use it. Given the rising rate environment, the best use is typically paying down any credit card debt. Then use the fund to attack any other debt, like pre-payment of mortgages. Also consider building a sinking fund to pay for future expenses, like replacing your car, furnace, roof or other large expense so you are ready when it needs replacement.

Stay curious about personal finance.

Your financial picture changes as your life changes, which is why it’s important to always learn something new about money that you can apply to your situation. Pick several books, blogs, podcasts, and videos that look interesting, as they may offer a fresh perspective on tips to improve your finances.

Once you understand the basics of your financial situation, it’s time to sit down and proactively plan ahead. Two of the most critical areas you can prepare for are minimizing your taxes for the years to come and saving for retirement. So plan ahead and feel free to ask for help.

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New Tax Rules for Retirement Accounts Can Save You Money

March 20 2023 RgKAdmin14 Tax Tips 0 comments

The SECURE Act 2.0, passed by Congress in late 2022, features numerous ways for you to save more money in your tax advantaged retirement accounts. Below are several of the bill’s provisions and what they mean for you.

• Money can continue to grow tax deferred. If you turn 72 in 2023 or later, you can keep money in a tax-deferred IRA or 401(k) for another 12 months to help the account continue growing before starting to withdraw funds. This retirement benefit is now available thanks to the required minimum distribution age being raised from age 72 to age 73. The age will increase again from 73 to 75 in 2033.

Action You Should Take: Review your retirement account distribution needs and use this extra time to help make your distributions more tax efficient. For example, if you must earn an additional $10,000 before you hit the next highest tax bracket, consider pulling more taxable income out of your retirement account to take advantage of this lower rate. Or use the extra time to consider converting funds tax-efficiently into a Roth IRA.

• Be aware of auto enrollment. The government wants you to save for retirement, so the new law allows businesses to automatically transfer a greater portion of your paycheck into their retirement plan. The maximum contribution that can now be automatically deferred into your employer’s 401(k) plan increases from 10% to 15%.

Action You Should Take: While saving more for retirement is a great idea, this automatic participation does not account for your particular financial needs. So be aware of the possibility that you will automatically be contributing to your retirement account and independently determine what you can afford to put towards retirement. Make any adjustments if necessary, as you are permitted to opt out of auto enrollment. Remember, you also need to build an emergency fund and pay your bills!

• Take advantage of higher catch-up limits. Starting in 2024, the $1,000 catch-up contribution for IRAs will receive an annual cost-of-living adjustment in increments of $100, while the $7,500 catch-up contribution for 401(k)s will increase to at least $10,000. This higher 401(k) catch-up limit will also be indexed for inflation starting in 2025. The additional catch-up contribution is available if you’re age 50 or older.

Action You Should Take: Review the annual savings limit for your retirement savings account, including the catch-up amount if you are 50 years or older. Then make adjustments to your retirement savings plan as soon as possible to take advantage of the higher savings limits.
This blog provides summary information regarding the subject matter at the time of publishing.

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Instructions on How to E-file a Federal and PA Tax Return

February 24 2023 RgKAdmin14 Tax Tips, Tax Preparation 0 comments

Both Pennsylvania and the federal government give individual taxpayers the option to file their taxes electronically, also known as E-filing.

There are a few benefits to E-filing your tax returns, including:

Faster because it is electronically transmitted directly to the taxing authorities’ computer system
Safer because the filing cannot get lost in the mail
More secure
More convenient, you don’t have to wait on line at the post office if you are too close to the filing deadline
If your E-file submission is rejected, then the IRS will email the filer with a link you can use to see an explanation and resolve the issue

Click here for instructions on how to E-file a Federal Tax Return

Click her for instructions on how to E-file a PA Tax Return

This blog provides summary information regarding the subject matter at the time of publishing. Please call our office at 610-296-2500 if you have questions on how E-filing works. This material may not be published, rewritten, or redistributed without permission. All rights reserved.

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It’s Tax Time! Tips to Get Organized

January 16 2023 RgKAdmin14 Tax Preparation, Tax Tips 0 comments Tags: Preparing for Tax Season

It may be the beginning of a new year, but now is the time to recap the previous year for Uncle Sam. Here are some tips and a checklist to help get you organized.

Watch for your tax forms.Forms W-2, 1099, and 1098 will start hitting your inbox or mailbox in the next couple of weeks. Review last year’s records and create a checklist of the forms to make sure you get them all.
Collect your tax documents using this checklist. Using a tax organizer or last year’s tax return will help you in the process. Sort your tax records to match the items on your tax return. Here is a list of the more common tax records:
- Informational tax forms (W-2s, 1099s, 1098s, 1095-A) that disclose wages, interest income, dividends and capital gain/loss activity
- Other forms that disclose possible income (jury duty, unemployment, IRA distributions and similar items)
- Business K-1 forms
- Social Security statements
- Mortgage interest statements
- Tuition paid statements
- Property tax statements
- Mileage log(s) for business, moving, medical and charitable driving
- Medical, dental and vision expenses
- Business expenses
- Records of any asset purchases and sales, including cryptocurrency
- Health insurance records (including Medicare and Medicaid)
- Charitable receipts and documentation
- Bank and investment statements
- Credit card statements
- Records of any out of state purchases that may require use tax
- Records of any estimated tax payments
- Home sales (or refinance) records
- Educational expenses (including student loan interest expense)
- Casualty and theft loss documentation (federally declared disasters only)
- Moving expenses (military only)

If you aren’t sure whether something is important for tax purposes, retain the documentation. It is better to save unnecessary documentation than to later wish you had the document to support your deduction.

Clean up your auto log.You should have the necessary logs to support your qualified business miles, moving miles, medical miles and charitable miles driven by you. Gather the logs and make a quick review to ensure they are up to date and totaled.
Coordinate your deductions.If you and someone else share a dependent, confirm you are both on the same page as to who will claim the dependent. This is true for single taxpayers, divorced taxpayers, taxpayers with elderly parents/grandparents, and parents with older children.

With proper organization, your tax filing experience can be timely and uneventful.

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TIPS FOR REDUCING YOUR 2022 FEDERAL TAX BILL

December 04 2022 RgKAdmin14 Tax Tips, Tax Preparation 0 comments

2022 Tax Tips for an Individual

We are alwlays looking ahead to the new year, which means it’s time to think about things you can do to reduce your 2022 federal tax bill. It looks like planning for income taxes may be a little simpler this year than in the past few years.

Lookfor Ways to Defer Taxable Income. Deferring taxable income (which includes accelerating deductions) when it makes sense is a good idea in an inflationary environment.
Evaluate Your Investment Assets with an Eye Toward Selling. Look at your investment portfolio to see if selling before year-end makes tax sense. If you have recognized capital losses this year (or have capital loss carryovers from previous years), you can use those losses to shelter 2022 capital gains.
Bunch Itemized Deductions to Maximize Their Value.You can deduct the greater of your itemized deductions (mortgage interest, charitable contributions, medical expenses, and taxes) or the standard deduction. For 2022, the standard deduction is $25,900 for joint filers, $19,400 for HOH, and $12,950 for single taxpayers. If your total annual itemizable deductions for 2022 will be close to your standard deduction amount, consider bunching your expenditures so that they exceed the standard deduction in one year, and then use the standard deduction in the following year.
Make Your Charitable Giving Plans.Donor-advised funds allow donors to make a charitable contribution to a specific public charity or community foundation that uses the assets to establish a separate fund to receive grant requests from charities seeking distributions from the advised fund. If you donate appreciated assets to a public charity, you can deduct the full fair market value of the donated asset. If you are age 70½ or older, consider a direct transfer from your IRA to a charity [known as a Qualified Charitable Distribution (QCD)]. While you will not be able to claim a charitable donation for the amount transferred to the charity, the QCD does count toward your Required Minimum Distribution (RMD).
Evaluate Intra-family Loans.You can lend money to relatives without any tax consequences if you charge interest at least equal to the Applicable Federal Rate (AFR), which is published by the IRS monthly. The AFR is typically lower than what commercial lenders offer, thus allowing the borrower to save money on interest expense. Making intra-family loans is still an attractive option, but it’s important to be sure you are charging a rate that won’t create a taxable gift, unless that is your intention.
Take Advantage of the Annual Gift Tax Exclusion. The basic estate, gift, and generation skipping transfer tax exclusion is scheduled to fall from $12.06 million ($24.12 million for married couples) in 2022 to $5 million ($10 million for married couples) in 2026. For 2022, you can make annual exclusion gifts up to $16,000 per donee, with no limit on the number of donees.

If you own a business, consider the following strategies.

Maximize Retirement Plan Contributions.You can make deductible contributions to several types of retirement plans, while earnings in the plan accumulate tax-free until they are withdrawn. For example, if you’re self-employed and set up a SEP-IRA, you can contribute up to 20% of your self-employment earnings, with a maximum contribution of $61,000 for 2022. If you’re employed by your own corporation, up to 25% of your salary can be contributed with a maximum contribution of $61,000. Other small business retirement plan options include the 401(k) plan (which can be set up for just one person), the defined benefit pension plan, and the SIMPLE-IRA. Be aware that if your business has employees, you may have to cover them too.
Plan Your Business Asset Purchases. The bonus depreciation rate is scheduled to drop from the current 100% deduction to 80% of the cost of qualified property placed in service after 2022. So, placing a qualified asset in service by the end of 2022, rather than waiting until 2023, can have a big impact since you will be able to deduct the entire cost of that asset this year. Some assets that don’t qualify for bonus depreciation are eligible for Section 179 expensing. For qualifying property placed in service in tax years beginning in 2022, the maximum Section 179 deduction is $1.08 million.
Take Advantage of Larger Deductions for Business Meals.Normally, the deduction for business meals is limited to 50% of the meal’s total cost. However, the cost of food and beverages provided by a restaurant that is paid or incurred in 2022 is 100% deductible (assuming the meal qualifies as a business meal). If you use the per diem method to reimburse employees for business expenses, you can treat the entire meal portion of the per diem rate paid or incurred in 2022 as being attributable to food or beverages provided by a restaurant, making the meal per diem 100% deductible.

This blog covers some of the year-end tax planning moves that could potentially benefit you, your family, and your business. Please contact us at 610-296-2500 if you have questions, want more information, or would like us to help in designing a year-end planning package that delivers the best tax results for your particular circumstances.

This blog provides summary information regarding the subject matter at the time of publishing. Please call our office at 610-296-2500 with any questions on how this information may impact your situation. This material may not be published, rewritten, or redistributed without permission. All rights reserved.

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Ideas to Improve Your Personal Cash Flow

November 14 2022 RgKAdmin14 Others 0 comments Tags: improving cash flow

Lack of proper cash flow is one of the most common reasons businesses fail. The same is often the case in many households. Here’s how the concept of cash flow pertains to you and some ideas to improve it.

Cash flow defined

Cash flow equals cash coming in (wages, interest, Social Security benefits) and cash going out such as the bills you pay and money you spend. If more is coming in than going out, you have positive cash flow. If the opposite is true, you have negative cash flow. Calculating and forecasting cash flow, unfortunately, can get complicated. Some bills are due weekly, others monthly. A few larger bills may need to be paid quarterly or annually.

Create your cash flow snapshot

Before improving your cash flow, you need to be able to visualize it. Although there are software tools to generate a statement of cash flow you can also take a “snapshot” of your cash flow by creating a simple monthly spreadsheet:

Type each month across the top of the spreadsheet with an annual total.
Note all your revenue (cash inflows), then create a list of expenses (cash outflows) in the left-hand column.
Enter your income and bills by month. Create a monthly subtotal of all your inflows. Do the same for your cash outflows. Then subtract the expenses from income. Positive numbers? You have positive cash flow. Negative numbers? You have negative cash flow.
Create a cumulative total for the year under each month to see which months will need additional funds and which months will have excess funds.

Ideas to improve your cash flow

Identify your challenges. See if you have months where more cash is going out than is coming in to your bank account. This often happens when large bills are due. If possible, try to balance these known high-expense months throughout the course of the year. Common causes are:
- Holidays
- Property tax payments
- Car and homeowners insurance
- Income tax payments
- Vacations
Build a reserve.If you know there are challenging months, project how much additional cash you will need and begin to save for this in positive cash months.
Cut back on annuities.See what monthly expense drivers are in your life. Can any of them be reduced? Can you live with fewer cell phone add-ons? How about cutting costs in your cable bill? Is it time for an insurance review?
Shop your current services.Some of your larger bills may create an opportunity for savings. This is especially true with home and car insurance.
Create savings habits to add to cash flow.Consider paying a bill to yourself in your cash outflows. This saved money is a simple technique to create positive cash flow each month to build an emergency reserve.

Understanding and looking at your cash flow situation will help you in the long term. Robert J. Kratz is available to answer any questions or concerns you may have by calling the office at 610-296-2500.

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Tips to Protect Your Social Security Number

October 17 2022 RgKAdmin14 Social Security 0 comments Tags: Protect Social Security Number, Social Security Number, Social Security Scams

What can bring more chaos to your life than losing your identity? When you have your Social Security number stolen, you have your only form of permanent identification taken from you. Here are some things that you can do to minimize the risk of having your number fall into the hands of the wrong people.

Never carry your card. Place your SSN card in a safe place. That place is never your wallet or purse. Only take the card with you when you need it.
Know who needs it. As identity theft continues to evolve, there are fewer who really need to know your SSN. Here is that list:
- The government. The federal and state governments use this number to keep track of your earnings for retirement benefits and to ensure you pay proper taxes.
- Your employer. The SSN is used to keep track of your wages and withholdings. It also is used to prove citizenship and to contribute to your Social Security and Medicare accounts.
- Certain financial institutions. Your SSN is used by various financial institutions to prove citizenship, open bank accounts, provide loans, establish other forms of credit, track digital payments, report your credit history or confirm your identity. In no case should you be required to confirm more than the last four digits of your number.
Challenge all other requests. Many other vendors may ask for your SSN, but having it may not be essential. The most common requests come from healthcare providers and insurance companies, but requests can also come from subscription services when setting up a new account. When asked on a form for your number, leave it blank. If your supplier really needs it, they will ask you for it. This allows you to challenge their request.
Destroy and distort documents. Shred any documents that have your number listed. When providing copies of your tax return to anyone, distort or cover your SSN. Remember, your number is printed on the top of each page of Form 1040. If the government requests your SSN on a check payment, only place the last four digits on the check, and replace the first five digits with Xs.
Keep your scammer alert on high. Never give out any part of the number over the phone or via email. Do not even confirm your SSN to someone who happens to read it back to you on the phone. If this happens to you, file a police report and report the theft to the IRS and Federal Trade Commission.
Proactively check for use. Periodically check your credit reports for the potential use of your SSN. If suspicious activity is found, have the credit agencies place a fraud alert on your account. Remember, everyone is entitled to a free credit report once a year. You can obtain yours on the Annual Credit Report website.

Replacing a stolen SSN is not only hard to do, but it can also create many problems. Your best defense is to stop the theft before it happens.

If you have questions or concerns, call the Robert J. Kratz office at 610-296-2500.

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Debit Cards: How to Use Them Safely

September 21 2022 RgKAdmin14 Others 0 comments

Save money and potential headaches with these debit card tips:

• Only use in-network ATMs. All debit cards are also ATM cards and used by many to access cash. One of the most common fees appears when you use an out-of-network ATM.

What you can do: Understand the ATM fees charged by your bank. Only choose a bank that provides free ATM withdrawals for in-network locations. Look at the back of your debit card to see what ATM networks are considered in-network. Then use only those ATMs.

• Fraud protection benefits are different. Most credit cards provide zero liability on any unauthorized charges. Debit cards also provide protection against fraudulent purchases, but there may be limitations depending on which financial institution issued your card. According to federal law, the maximum number of fraudulent transactions you’ll be responsible for depends on when you notify your bank that your card is lost or stolen:

What you can do: Immediately notify your financial institution as soon as you realize that your debit card is lost or stolen. Frequently review transactions online to identify any unknown charges. Also check with your bank to verify the liability coverage and the timing required to report fraud on your debit card.

o Immediately notify your bank before any unauthorized charges are made: Zero liability

o Within two business days: Up to $50

o After two business days but within 60 days: Up to $500

o Fail to notify within 60 days: Unlimited

• Have multiple ways to access your cash. If your debit card gets lost or stolen, have another way to pay bills until your new debit card is issued. This is especially true if you’re traveling.

What you can do: Ask your bank about its options for issuing multiple debit cards for the same checking account. If you’re opening an account other than a free checking account, ask about potential fees, service charges and balance limitations.

• A debit card is not always the best payment method. Remember that a debit card provides financial access to your bank account. If it goes bad, your ability to pay other bills can be affected. For example, a stolen debit card may require you to lock your checking account. What does that mean for your other outstanding payments, like your mortgage, vehicles or utilities? Your financial life can be thrown into chaos.

What you can do: Avoid using a debit card on websites that are targets for scammers. Avoid using it for air travel given all the recently cancelled flights, as you could easily empty your checking account while trying to get refunds. Consider using a credit card or a separate bank account as a backup in case the account linked to your debit card needs to be shut down.

While debit cards are quickly overtaking checks and cash as the most popular method of payment, it is important to evolve your use of them to maximize their benefit to you. Get advice from your banker or talk to us at Robert J. Kratz 610-296-2500.

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Tips to improve your credit score

August 31 2022 RgKAdmin14 Credit Score Tips 0 comments

Credit scores are used to determine interest rates on mortgages, car loans and even the amount you pay for insurance premiums. Because of this, it is a good idea to review ways to improve yours. Here are some ideas:

Look for errors on your credit report.The place to start is a review of your credit reports. You are entitled to get a free copy of your credit report every 12 months from each credit reporting company: Equifax, Experian and TransUnion. So get a copy of your report and review it for accuracy. Aggressively follow up to correct any errors using the process outlined by each credit reporting company.
Pay bills on time.The easiest way to improve your credit is to have a string of on-time payments for all bills reported to the credit agencies. This is the most important part of your credit score equation. So while reviewing your credit report, pay special attention to who is reporting your payments and note if any are delayed. Then gather all your monthly bills, identify the due dates, and take advantage of automated tools to ensure the payments are always on time.
Get credit card utilization as low as possible.The amount of credit you’re using at any given time is called your credit utilization and is the second-biggest factor in your credit score next to paying on time. For example, if your credit card limit is $5,000 and your balance is $3,000, your credit utilization is 60%. Try to reduce this percentage to no more than 20%. You can do this by spending less, paying off as much of your balance as possible, or increasing your credit limits.
Sign up for score-boosting programs.A newer way to help improve your credit is to include information on your credit report that normally isn’t reported. Programs like Experian Boost and UltraFICO help you add bills such as rent, utility, and cell phone payments to your credit report, and to analyze how you use your checking, savings, or money market accounts. Be aware that these programs may ask for access to you bank accounts and could easily work against you if the reporting has a negative impact on your credit if there is a billing problem.
Avoid requests for new credit.Trying to open a new credit or loan account could lower your score by as much as 10 points. The more inquiries made by creditors who are trying to assess your creditworthiness when trying to open a new account, the more impact it has on your credit score. If you notice a number of vendors are making inquiries, you can always turn off this function with credit agencies. Just remember to turn it back on if you are actively refinancing your mortgage or looking for other credit. While in the long-term your score can be maximized by having a diverse mix of different types of credit accounts, in the short-term adding new accounts will negatively affect your score.

How quickly you can raise your credit score obviously depends on your individual situation but following these tips will lead to a higher credit score sooner rather than later. As always Robert J. Kratz is always available to help. You can call us at 610-296-2500.

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Taxpayers Beware – Plan Now for 2023 or Pay Later

Taxpayers Beware – Plan Now for 2023 or Pay Later

GREAT MONEY HABITS TO PRACTICE

New Tax Rules for Retirement Accounts Can Save You Money

Instructions on How to E-file a Federal and PA Tax Return

It’s Tax Time! Tips to Get Organized

TIPS FOR REDUCING YOUR 2022 FEDERAL TAX BILL

2022 Tax Tips for an Individual

If you own a business, consider the following strategies.

Ideas to Improve Your Personal Cash Flow

Debit Cards: How to Use Them Safely

Tips to improve your credit score

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