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It’s Tax Time! Tips to Get Organized

HomeAuthor RgKAdmin14
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.

 

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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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.

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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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.

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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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.
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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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.

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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It’s Time to Hire a CPA: What You Need to Do
August 23 2022 RgKAdmin14 Tax Tips, Tax Preparation 0 comments Tags: what you should expect from CPA, Prepare to meet with accountant

Do you get anxious or stressed when tax time rolls around? If you have never worked with a Certified Public Accountant (CPA) for tax preparation, now may be the time to consider it. With the ever changing tax laws you may be missing out on important deductions. Starting the process in August rather than waiting until next year may save you from headaches.

What should you expect of a CPA?

First and foremost, expect your accountant to file your tax return accurately and on time. Reputable accountants do more than complete and file your return; they also represent you if an audit is requested by the Internal Revenue Service (IRS), and they keep electronic copies of your tax return.

How should you prepare to meet with an accountant?

Preparation is key to a successful first meeting. You may want to arrange a phone call before your first in person meeting.

  • Begin by asking for a breakdown of the fees you may incur. Some fees are optional, so choose those you need and/or what makes you most comfortable.
  • You should tell the accountant what documents you have and ask what else, if anything, you need to bring to the meeting.
  • With what you need in-hand, ask if there is a particular way to organize your documents that will make tax preparation easier and filing faster?

Now that you know what you need and how to organize it, schedule an in-person meeting.

How long should you keep your tax return and supporting documents?

According to the IRS you should:

  1. Keep records for 3 years if situations (4), (5), and (6) below do not apply to you.
  2. Keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later, if you file a claim for credit or refund after you file your return.
  3. Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction.
  4. Keep records for 6 years if you do not report income that you should report, and it is more than 25% of the gross income shown on your return.
  5. Keep records indefinitely if you do not file a return.
  6. Keep records indefinitely if you file a fraudulent return.
  7. Keep employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.1

The Pennsylvania Office of the Attorney General reminds people

“to safeguard “paperwork that includes personal and financial information – like your tax returns and forms – to protect you from identity theft.

  • Keep tax paperwork in a safe location.
  • Shred any documents that are no longer needed.
  • If you are filing online, make sure you have an updated firewall, antivirus and spyware software installed on your computer.
  • Do not leave tax documents in an open outgoing mailbox. Take them directly to the Post Office or mailbox.”

When you use a CPA some of these concerns will be moot. He/she will be responsible for either filing online or mailing your returns.

When your taxes are completed your tax return and all related documents will be returned to you. Keep them filed together in a safe place. They will help you:

  • Prepare for the following tax year. Although your accountant keeps electronic files of your return, you should keep all your supporting documents for the designated amount of time as outlined above.
  • In case they are required by a lending organization as proof of income for a loan.
  • If you or your child is applying for federal student aid by filing a FAFSA (Free Application for Federal Student Aid).
  • If you need to file an amendment within three years.

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. Remember, call our office to learn what you need to prepare for your 2022 taxes.

This material may not be published, rewritten, or redistributed without permission. All rights reserved.

 

https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records#:~:text=Keep%20records%20for%203%20years%20from%20the%20date%20you%20filed,securities%20or%20bad%20debt%20deduction

 

https://www.attorneygeneral.gov/protect-yourself/consumer-advisories/do-you-have-any-tax-preparation-advice/

 

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The Home Gain Exclusion: Make Sure You Qualify!
June 22 2022 RgKAdmin14 Tax Tips, Capital Gains 0 comments Tags: capital gains tax, capital gains, home gain exclusion

Across the country, many homeowners are cashing out to multiples over list price, especially since one of the largest tax breaks available to most individuals is the ability to exclude up to $250,000 ($500,000 married) in capital gains on the sale of your personal residence. Here is what you need to know.

Background

As long as you own and live in your home for two of the five years before selling your home, you qualify for this capital gain tax exclusion. Here are the official hurdles you must jump over to qualify for this tax break:

  • Main home. This is a tax term with a specific definition. Your main home can be a traditional home, a condo, a houseboat, or mobile home. Main home also means the place of primary residence when you own two or more homes.
  • Ownership test. You must own your home during two of the past five years.
  • Residence test. You must live in the home for two of the past five years.
  • Other nuances:
    • You can pass the ownership test and the residence test at different times.
    • You may only use the home gain exclusion once every two years.
    • You and your spouse can be treated jointly OR separately depending on circumstances.

When to pay attention

You live in your home for a long time. The longer you live in your home, the more likely you will have a large capital gain. Long-time homeowners should check to see if they have a capital gain prior to selling their home.
You have old home gain deferrals. Prior to the current rules, home gains could be rolled into the next home purchased. These old, deferred gains reduce the cost of your current home and can result in a capital gains tax.
Two homes into one. Newly married couples with two homes have a potential tax liability as both individuals may pass the required tests on their own property but not on their new spouse’s property. Prior to selling these individual homes, you may wish to create a plan of action that reduces your tax exposure.
Selling a home after divorce. Property transferred as a result of a divorce is not deemed a sale of your home. However, if the ex-spouse that retains the home later sells the home, it may have an impact on the available amount of gain exemption.
You are helping an older family member. Special rules apply to the elderly who move out of a home and into assisted living and nursing homes. Prior to selling property, it is best to review options and their related tax implications.
You do not meet the five-year rule. In some cases you may be eligible for a partial gain exclusion if you are required to move for work, disability, or unforeseen circumstances.
Other situations. There are a number of other exceptions to the home gain exclusion rules. This includes foreclosure, debt forgiveness, inheritance, and partial ownership.

A final thought

The key to obtaining the full benefit of this tax exclusion is in retaining good records. You must be able to prove both the sales price of your home and the associated costs you are using to determine any gain on your property. Keep all sales records, purchase records, improvement costs, and other documents that support your home’s capital gain calculation.

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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Protect Your Emergency Fund From Inflation
May 17 2022 RgKAdmin14 Others 0 comments

Most financial experts suggest keeping three – to – six months’ worth of household expenses in savings to help in case of an emergency. But with record inflation, that task just got a lot harder to accomplish as virtually every safe place to put your emergency funds will not provide interest rates that keep pace with inflation. But that does not mean you cannot increase the rate of return on these funds.

Here are some ideas to reduce the impact of inflation on your emergency funds.

  • Actively monitor your savings account rate.

    Earlier this year the Federal Reserve increased interest rates for the first time since 2018. In addition, the head of the Federal Reserve is suggesting there may be several of these rate increases in the next twelve months. This should increase the interest you can earn on the cash in your emergency account.

What you need to know: Not all savings accounts are created equal. When the Fed increases the interest rate, your saving account rate should also go higher. . . immediately. But this is not always the case. If your bank is slow to raise your savings rate, be willing to monitor and shift funds to a bank that does. Just make sure the funds are still FDIC insured and are kept at a reputable bank.

  • Take a look at Series I Savings Bonds.

    Series I Savings bonds are issued and backed by the U.S. government and feature two interest rate components: a fixed rate and an inflation rate. The fixed rate is set when the bond is issued and never changes during the life of the bond. The inflation rate resets semi-annually based on the Consumer Price Index.

What you need to know: You must hold an I bond for at least 12 months before redeeming it. And although you can redeem it after one year, you’ll have to pay a penalty worth the interest of the previous three months if you redeem the bond within five years. And remember, you must be prepared to pay the penalty if you need the funds for an emergency.

  • Creative use of Roth IRA funds in an emergency. Roth IRAs are funded with after-tax dollars. Because of this, early removal of the initial contribution is tax and penalty-free. If you dip into the earnings, however, you will not only be subject to income tax but also may be subject to a 10% early withdrawal penalty.

What you need to know: Use of a Roth IRA is often a creative way to fund your emergency account while achieving higher returns with conservative investment choices, but it is not for the faint of heart. If you get this one wrong, it could cost you in taxes, penalties, and lost fund value in a bear market. Prior to removing funds from any IRA, it makes sense to conduct a tax planning session.

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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The Secret to a Quick Tax Refund
April 04 2022 RgKAdmin14 Others 0 comments

Here’s how to get your overpayment as soon as possible

Delayed tax refunds, penalties for not filing 2020 tax returns on time that were actually filed on time, and timely tax payments being flagged as late are just some of the headaches taxpayers are grappling with due to a massive backlog of several million unprocessed tax returns the IRS is trying to wade out from under.

What you need to know

Here’s how to avoid getting your tax refund delayed and steer clear from late-filing and payment penalties resulting from the IRS backlog:

  • E-file your return! The secret to getting a quick tax refund is to e-file your 2021 tax return! The IRS says approximately 90% of the more than 160 million individual tax returns expected for the 2021 tax year will be e-filed. The majority of these taxpayers will avoid any issues filing their return and getting their refund. If you do e-file, don’t forget to sign Form 8879, which authorizes the e-filing of your return.
  • Stay calm if you receive a letter from the IRS. You may receive an IRS notice indicating you have an unfiled tax return or that you have an unpaid balance on your account. If the notice was mailed because of the backlog and you indeed filed the tax return in question or paid the amount due listed, the IRS says there is no need to call or respond to the notice as it’s continuing to process prior-year tax returns as quickly as possible.
  • Certified mail is your friend. If you receive an IRS notice for a situation not related to the backlog, you’ll want to respond in a timely fashion via certified mail. This will provide proof of your timely correspondence. So even if your response gets lost or caught up in the backlog, you’ll have evidence that you responded by the deadline listed on the notice. Remember that delays in responses could generate penalties and additional interest payments.
  • Be patient if you need to talk with the IRS. The IRS received a record 282 million phone calls during its 2021 fiscal year, according to National Taxpayer Advocate Erin Collins. Only 32 million of these calls were answered. Collins said the best time to call the IRS are Wednesdays through Fridays, especially early mornings starting at 7 am Eastern time.

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, except as noted here. All rights reserved.

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