Year End Reflections and Plans for 2019

Year end is the perfect time to reflect on and celebrate accomplishments made during 2018. Yes, year-end is time to enjoy your success. It’s also a great time to plan for the accomplishments you want to achieve in 2019. Whether you are expanding or launching something new, setting objectives is your starting point.

First, identify a few specific areas of your organization you’d like to change or improve in 2019. Want higher profits, cash flow or client base? Need a new employee or system? No change or improvement will happen without a plan to get it done, starting with clear and detailed objectives.

Follow these three tips for objectives that give you a head start toward the finish line:

Gather the Numbers

Quantify all the applicable aspects of your objective. This task will require some research

and could entail making estimates and assumptions. For example, how much profit or client growth do you want to achieve? Can you express that growth as a dollar amount and as a percentage? How much would a new system or employee cost? How much of that cost would be one-time and how much would be ongoing? The more numbers you can nail down or estimate, the better.

Be Realistic

Keep market conditions and your resource capacity in mind when setting growth objectives. It’s important to be realistic in order to ensure that your objectives are achievable. Setting unrealistic objectives is not only discouraging, it can result in allocating resources – aka time and money – on activities that are unlikely to succeed. Better to target those resources on realistic, achievable objectives.

Adjust As Needed

No matter how well you research, estimate and focus on the achievable, any view of future events is imperfect. Market conditions and other factors that you depended on when setting your objectives could change. Periodically assess progress on meeting your objectives. Are you on track? Why or why not? Based on those answers, you may need to make some adjustments to the objectives that you set at the beginning of the year.

Year end is the perfect time to reflect on and celebrate the year’s accomplishments and to plan for the objectives you want to set for next year. Identify specific things you’d like to change, set detailed and clear objectives, and you’ll have a great head start to improve your organization in 2019.

Last Minute Tax Tips for 2018

Less than two weeks left to go before the year ends. Wow! You meant to do some tax planning for 2018. Is it too late now? Believe it or not, there’s still time to implement some planning moves that can improve your tax situation for 2018 and the future.

Here are four last minute tax tips you can jump on and still enjoy the holidays:

Make HSA contributions

If you are an eligible individual under the health savings account (HSA) rules for December 2018, you are treated as having been eligible for the entire year and can make a full year’s deductible contribution for 2018. The maximum contribution provides a deduction of $3,450 for individual coverage and $6,900 for family coverage. Taxpayers age 55 or older also get an additional $1,000 catch-up amount.

Nail down stock losses 

Consider realizing losses for stock you planned to divest anyway. Those losses can offset gains from other stock or investment asset sales. Losses that exceed gains may be deducted up to $3,000, $1,500 for married taxpayers filing separately.

Apply a bunching strategy to deductible contributions and/or payments of medical expenses 

Beginning in 2018, many taxpayers who claimed itemized deductions in prior years will no longer benefit from doing so because the standard deduction has been increased and many itemized deductions have been cut back or abolished. A bunching strategy can help you get around these new limits — by accelerating or deferring discretionary medical expenses and/or charitable contributions into the year where they will do some tax good.

Use IRAs to make charitable gifts 

If you are age 70½ or older, own IRAs, and are thinking of making a charitable gift, consider arranging for the gift to be made by way of a qualified charitable contribution, a direct transfer from the IRA trustee to the charitable organization, up to $100,000. The transferred amount isn’t included in gross income or allowed as a deduction on your tax return. A qualified charitable contribution before year end is a particularly good idea for retired taxpayers who do not need all of their as-yet undistributed required minimum distribution (RMD) for living expenses.

Yes, it’s late in the year for tax planning, but not entirely too late. Implementing one or more of these last minute tax tips will improve your tax situation for 2018 and future years. Makes the holidays even merrier, doesn’t it?

Do I Need to Keep That?

It happened again last week. A tax client e-mailed me to ask for a copy of her 2016 income tax returns. She was refinancing her home and the lender had asked for two years of tax information. As required, I had sent a file copy of her tax returns after they were electronically filed. She apparently did not save it.

I was happy to send her another copy. But what were her options if I was not available to help? What if she had prepared her own returns and not kept a copy? Is this really a big deal?

The short answer is “yes”. Taxpayers should keep a copy of their past tax returns and supporting documents for at least three years. Taxpayers claiming certain securities or debt losses should keep their tax returns and documents for at least seven years.

Here are five tips about prior-year tax records:

  1. Save time – Keeping copies of prior year tax returns saves time. Often, prior-year tax information is needed to file a current year tax return or to answer questions from the IRS.
  2. Validate identity – Taxpayers using tax filing software for the first time may need their adjusted gross income (AGI) amount from their prior year’s tax return to verify their identity. Learn more at Validating Your Electronically Filed Tax Return.
  3. Order a transcript – A tax transcript that summarizes tax return information and includes AGI can be ordered for free from the IRS. Transcripts are available for the current tax return, plus the past three tax years. Plan ahead, though, because delivery typically takes five to 10 days from the time the IRS receives the request.
  4. Get an actual tax return copy – This option costs $50 per copy and requires taxpayers to complete and mail Form 4506 to the appropriate IRS office listed on the form.
  5. Verify tax payments – Good news! You don’t need a transcript or return copy to find out if you owe the IRS. Taxpayers can verify payments or amounts owed in the last 18 months. Just click on this link – view their tax account.

The bottom line is simple. Save time and aggravation by keeping prior-year tax information. Most taxpayers should keep tax returns and supporting documents for at least three years, seven years for taxpayers with securities transactions or losses. Keeping these records yourself prevents all the time and effort to get them from your tax preparer or the IRS.

Children and Dependents under the New Tax Law

One of the news headlines about the 2017 Tax Cuts and jobs Act was the elimination of personal exemptions, which took away a $4,050 tax deduction for each taxpayer, spouse and qualified dependent. Families with several children were pretty unhappy to hear about losing that hefty tax deduction, and even unhappier to wait for the IRS regulations to understand how this change would impact their tax bill.

Well, the wait is over. In November 2018, the IRS issued notices and regulations to clarify the new tax law regarding the Child Tax Credit, the Additional Child Tax Credit, and the new Credit for Other Dependents. Here are the details you’ll need to understand for your 2018 income tax return:

  • Child Tax Credit

Beginning in 2018, you may able to claim the Child Tax Credit if you have a qualifying child under the age of 17 and meet other qualifications, like the tests for support and residency. The maximum amount for the Child Tax Credit is $2,000 per qualifying child. Each qualifying child must have a Social Security Number issued by the Social Security Administration before the tax return due date, including extensions.

  • Additional Child Tax Credit

Qualifying taxpayers may take up to $1,400 of an Additional Child Tax Credit for each qualifying child under the age of 17. This credit is refundable, meaning that the credit may give you a refund even if you don’t owe any federal taxes.

  • Credit for Other Dependents

Dependents who can’t be claimed for the Child Tax Credit may still qualify for the Credit for Other Dependents of up to $500. Examples include children 17 years of age or older or parents for whom you provide 50% or more of financial support. This credit is non-refundable, meaning that it can only be used to offset tax liability. No refund is provided if taxes are not due or the credit is greater than the taxes due.

Not sure if your dependents qualify you for the Child Tax Credit, the Additional Child Tax Credit, or Credit for Other Dependents? The IRS has you covered. Use their Interactive Tax Assistant to see if you’re eligible.