Fleming Financial Solutions Inc.

Tag: Tax Planning

  • You Owe the IRS…Now What?

    You Owe the IRS!

    Now what do you Do?

    Let’s Talk About Your Options!

    George and Shirley came to see me to complete their tax return. They had been referred to me by another client of mine.

    George and Shirley had been blessed to have great and stable jobs. Even better, Shirley won a contract to provide support services to a government contractor. As they had never run a small business, they were referred to me to help them. Unfortunately they waited until 2015 to contact me as opposed to 2014 immediately after she won the contract.

    The good news was winning the contract, the bad news was they owed more taxes than they expected. I explained through tax planning we could have avoided the situation if they had contacted me prior to year end last year. With that not happening, there were several options open to them.

    Their options were:

    1. Pay the balance due in fall
    2. Get a loan to pay the balance
    3. Borrow from retirement accounts
    4. Offer in Compromise
    5. Currently Not Collectible
    6. Bankruptcy
    7. Installment Agreement
    • Paying the loan in full or borrowing from a lender or from their retirement were options they either couldn’t do or were unwilling to do.
    • An Offer in Compromise allows you to offer the IRS a lower amount than is currently owed. Because of their income and assets, George and Shirley do not qualify for the Offer in Compromise.
    • Currently Not Collectible allows you to delay collection action if you can prove that you don’t have the income or assets to pay the debt. George and Shirley couldn’t quality because of their income and assets.
    • Bankruptcy was also an option but the tax debt was too new to be considered and they did not want to affect their credit.
    • The last options available were an Installment Agreement (IA). With an IA you agree to pay the IRS a set amount monthly until the debt is paid. There are three options with installment agreement; each depending on the amount due.

    If you owe the IRS less than $10,000 you qualify for the Guaranteed IA. Your minimum acceptable payment is $25 a month debt is paid. Certain qualifications must be met to qualify, these include but are not limited to owing only income taxes and no other types of taxes; not able to pay taxes immediately out of savings or other means, have not had an IA in the last 5 years and able to pay the tax fully within 3 years (36 months).

    If you owe more than $10,000 but less than $25,000 you may qualify for the Streamlined IA. Like the Guaranteed IA, you are not required to fill out a personal financial statement and can setup a payment plan even if you have the means to pay the tax liability in full. Additional qualifications include filing all returns on time, paid in full during the payment period.   Also, the tax liability must be paid within 5 years (60 months) or before the Collection Statute Expiration Date (CSED) which is a ten year period from the tax assessment date.

    If you owe more than $25,000 you’ll work with a revenue officer who’ll require you to complete and submit personal financial statement with supporting documentation. A decision will be made based on your numbers as to how much you can pay. The IRS will compare your monthly income and your monthly allowable expenses and the difference is the amount the IRS will expect you to pay.   You’ll pay this amount until the debt is paid in full or until you reach the CSED.   The IRS may ask you to authorize an extension of the CSED in order to qualify for this payment plan.

    George and Shirley owed slightly more than $25.000 so I suggested they pay an amount that brought them below $25,000 so they could qualify for the Streamlined IA. As such they were able to negotiable a monthly payment that they could live with!

    Additionally I immediately began reviewing their personal finances and business income for changes we could make now so they wouldn’t owe in the future.   This was ultimately a good outcome for them. What about you?

    If you find yourself owing the IRS and want an open and honest discussion about your options, schedule an appointment at THIS LINK and come to see me. Don’t put it off…it will only get worse.

    Let’s beat the IRS together….Legally.

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  • Need to Save? 22 Ideas to Help You!

    Need to Save Money?  Here How!

    According to the U.S. Department of Commerce, Bureau of Economic Analysis, as of December 1, 2012, the Personal Savings Rate in the United States was 6.5%.    This is based on savings as a percentage of Disposable Personal Income or DPI.

    DPI is defined as the total amount of money available for an individual or population to spend or save after taxes have been paid.

    As we struggle with the economy and the sequestration furloughs,  and look for ways to increase our savings or just maintain what we have, here are a few ideas for you to put into place.

    1. Each night when you come home, empty your pockets and put any change into a jar to save.  You’ll be surprised how quickly it can add up.
    2. Quit smoking and save on average about $6 per pack.  If you smoke 2 packs a week, that’s $624 up in smoke.
    3. Put that lottery ticket money you spend each day into a savings account instead of funding the state.  They tax you enough as it is.
    4. Take your lunch to work.  $10 a day is $50 a week or $2600 a year you could be saving.
    5. Consider a second job or part-time business opportunity.  Use it exclusively for savings goal or paying off debt.
    6. Transfer balances from high interest rate credit cards to lower rate cards.
    7. Instead of paying extra to pay down a lower interest mortgage, instead use the additional to pay 12% to 24% credit card balances.
    8. Save for your purchases instead of using credit cards
    9. Tithing is a great way of budgeting – it forces you to live on the 90%.
    10. Pay Yourself 2nd.   Start off saving at least 5% of your gross income and build from there.
    11. Current practice calls for creating an emergency savings fund equal to 3 to 6 months of your living expenses.
    12. Consider a whole life insurance policy as an alternate savings vehicle.
    13. Comparison shop for your credit cards, home owners insurance, life, auto insurance and home telephone and cellphone services.
    14. Take advantage of payroll deduction plans for retirement and savings accounts.  Payroll deduction is a painless way to save.
    15. Begin putting together a cash flow plan for your family (budget)
    16. Make a weekly or bi-weekly commitment to review the family finances with your spouse.
    17. If you regularly get a tax refund, it means the IRS is getting an interest free loan from you.
    18. Save Your Tax Refund or use it to help pay off any outstanding debts.
    19. Clip those newspaper and sales paper coupons and use them before they expire.  Buy only if you need to not because something’s on sale.
    20. Use Groupon, Living Social and other social media sites as savings resources, too.
    21. Work to improve your credit scores – the higher your scores, the lower your loan interest rates.
    22. Save your next pay increase.

    Lastly, be willing to make the hard financial choices and stay the course.  Being debt free and under financial control will relieve much stress and tension from you and your family’s lives.

    Need a good “cashflow tool”?  Click here and take a look at the video.  It’ll be worth your time and effort.

    If I can help you with these and other financial issues, including tax planning and preparation, business consulting or incorporation services, please feel free to give me a call or visit my website at www.flemingfinancialsolutions.com and schedule an appointment.

  • IRS Delays Open of Filing Season!

    Tax Time
    Tax Time

    Though we got past the tax portion of the Fiscal Cliff, it wasn’t without problems. The IRS announced that it won’t begin accepting tax returns for most filers until January 30, 2013 and for some select filers until February or March. See the letter from the IRS below –

    http://www.irs.gov/uac/Newsroom/IRS-Plans-Jan.-30-Tax-Season-Opening-For-1040-Filers

  • 30th Anniversary Offer – Celebrate With Me!

    It’s my 30th Anniversary in Business and I want to share it with you!

    It’s hard to believe but I have been involved in some form of business ownership since 1982.

    I began with one bookkeeping client on a Digital VAX machine running one of the first computerized accounting packages. That evolved into tax preparation. I later added life and health insurance and basic financial planning. I’ve dabbled in mortgage loan origination and helped many companies with their sales and marketing. Its been a fun ride and I still have some hair left after wearing some many different hats.

    So, as I said, I’m celebrating my 30th Anniversary and didn’t want to do it alone. I’ve decided to make some special offers to you to celebrate with me and to give you a “jumpstart” for the new year.

    Here’s what I’ve got –

    Business Plan – If you need a business plan, you can save $450 by celebrating with me. I’ll create your complete business plan including SWOT analysis and financials and consultations with me and other resources as needed. The usual fee for this is $1,500 – your invest is $1,050.

    Call re:  Payment plan for this offer!

    CLICK HERE for Business Plan

    Incorporation Services -You’ve been putting off properly setting up your business. Well, now is the time to do it right. Whether you need an LLC, Partnership, S Corporation or C Corporation, lets get it done for the new year.

    I’ll create the necessary Articles, get your Sales and Use Tax number (if needed), your Federal Employer ID Number and provide at least one hour of consulting to be sure we get it right. Oh, and also I’ll be your resident agent (in Maryland) and get you a corporate seal to boot and get you done in 2 weeks. (Try that with my competitors and see what happens!)

    You’ll save $150 off of the usual $500 fee – Your investment only $350.00. (Investment does not include the state filing fees)

    CLICK HERE for Incorporation Services

    501(c)3 Application Assistance– You’ve always wanted to be a servant and help those in need. You have a passion to help but didn’t have a vehicle to do so. You thought that setting up a 501(c)3 organization was both confusing and expensive.

    Well, now is the time to act.

    I will walk you through every bit of the 1023 application to make the process easy. I’ll help you with the Narrative, the Financials, Conflict of Interest and any other sections that might be a stumbling block.

    You would normally invest $600 for this service; celebrate my anniversary and you’ll save $180. Your invest – $420 (Does not include state incorporation fees or the IRS application fee)

    CLICK HERE for 501(c)3 Assistance

    Incorporation and 501(c)3 Combination – If you need to complete both the incorporation and the 501(c)3 application process, click below to get the combination offering

    CLICK HERE for Combination Services

    Deadline has been extended to January 5, 2013. (Services can be provided throughout 2013 as needed)

    So act now! Celebrate my anniversary and celebrate your dreams.

    P.S. – Offer is not available for projects already started!

  • Healthcare Reform Upheld – What It Means for You!

    By now of course you’ve heard that the U.S. Supreme Court has upheld the key provisions of the Affordable Care Act, or “Obamacare.” In an unexpected twist, the Court ruled that the controversial individual mandate is constitutional, but under the government’s power to tax, rather than to regulate commerce.

    We don’t need to go into the details of the ruling itself — just turn on your television, and somewhere, somebody is opining on it right now! But we do want to remind you the Court’s decision means several new taxes will go into effect as scheduled:

      • On January 1, 2013, the Medicare tax will go up by 0.9% for individuals earning over $200,000 ($250,000 for joint filers, $125,000 for married individuals filing separately).

      • Also on January 1, there will be a new “Unearned Income Medicare Contribution” of 3.8% on investment income, for those earning more than $200,000 ($250,000 for joint filers).

      • Beginning on January 1, 2014, there will be a new $2,500 limit on tax-free contributions to flexible spending accounts, and employers with more than 50 employees will face a penalty of $2,000 per employee for not offering health insurance to full-time employees.

      • Finally, the threshold for deducting medical and dental expenses rises from 7.5% of adjusted gross income to 10%. This will make these expenses even harder to deduct without help from advanced strategies like Health Savings Accounts or Medical Expense Reimbursement Plans.

    So, while the constitutional issues may be settled, several planning challenges certainly remain. We’ll be following developments carefully in order to help you navigate these new challenges. If you have any questions, don’t hesitate to call us at 240-356-5050.

  • Need New Business Equipment Now? Let the Tax Laws Help!

    Dr. Watson watched another potential client walk out of his music studio door.  It wasn’t that Dr. Watson was a poor music engineer.  In fact, he is great at his craft.  His problem was that his equipment is outdated and slow.  Dr. Watson knew he needed to update his systems but he didn’t have the cash available.  He called me for ideas.

    During our consulting session, we discovered that Dr. Watson could “kill 2 birds with 1 stone”.  He could get the equipment he needed now and reduce his taxes at the same time, but he had to act fast!

    Recent changes in the IRS tax laws would allow Dr. Watson to completely write-off his new equipment (up to as much as $500,000) this tax year (2011) if he entered into a purchase agreement and began using the new equipment before December 31, 2011.  (Normally, he would have to “depreciate” the cost of the equipment over its useful life which could be anywhere from 3 to 40 years.)

    Using a credit card for a small down payment and the vendor’s line of credit, Dr. Watson purchased $10,000 in new equipment for his music studio.

    So, What does this do for Dr. Watson?

    • As a sole proprietor falling into about the 20% tax bracket, his purchase will save him $2,000 in taxes when he files his tax return,
    • He’s now able to attract new business and offer his previous and current clients faster service on cutting edge technology,
    • He preserves his cash now and won’t have to make a payment on his equipment for 30 to 45 days.  (Just enough time to bring in a couple of new paying, clients!)

    The IRS tax laws used by Dr. Watson also apply to the business use of computers, software, vehicles, furniture and fixtures, etc.  but these laws may change after December 31, 2011.

    As usual with the tax laws, your situation may be different.  In some cases, if your business is going to report a loss before these equipment deductions, you won’t be able to use the write-off this year.   The write-off will carry forward to the next year.  This is why you will need to review your particular situation with your tax accountant (or me).

    Hopefully, you’ve found this helpful.  Feel free to comment.

    If you’d like to contact me regarding this or other tax planning or business ideas, please give me a call at 240-356-5050.

    To Your Financial Health!

     

     

     

  • Clergy Tax Facts – Housing Allowance

    As a “qualified” minister, you are eligible to receive lodging from the church free of income tax liability. This is known as the Housing Allowance. A housing allowance may be provided for a minister living in employer-provided housing or in minister provided housing (owned or rented). This is a key component of your income tax preparation.

    To be qualified and eligible, you must meet 5 IRS tests –

    • Be licensed, ordained or commissioned by the church,
    • Administer sacrements – serving communion, baptizing, dedicating infants, performing marriages and funeral services,
    • Conduct religious worship,
    • Be considered a religious leader by your church or parent denomination, and
    • Have management responsibility in the control, conduct or maintenance of your local church or parent denomination.

    Every qualified minister should have a portion of salary designated as a housing allowance. This provides an opportunity to exclude dollars from gross income and save on your income taxes.

    Typically, the Housing Allowance cannot exceed the fair rental value of the housing including furnishings plus utilities. Any allowance in excess of these guidelines is considered taxable income.

    Allowable Housing expenses include:

    utilities,
    principal and interest payments,
    down payment on house purchase,
    real estate ommission,
    real property taxes,
    homeowner’s insurance,
    structural maintenance and repairs,
    landscaping, gardening, pest control, home association or condo fees,
    furnishings, decoration and local telephone expense.

    The qualifying minister should submit a housing related expense estimate to the church for the coming year and the church should adopt a written designation for the housing allowance and include the designation in the church minutes or resolutions.

    This is just an overview of the issues regarding the Housing Allowance.

    Please discuss this in more detail with your board or your church accountant or feel free to give me a call at 240-356-5050

  • Direct Sellers and MLM’s! – the IRS is looking for you!

    In an ongoing effort to find unreported or underreported revenues, the IRS has now created a video for Direct Sellers and MLM’s.

    This video is to “help” you properly record and report your income each year.  It also helps you determine if you really have a business or a hobby.  (The tax laws treat each differently).

    The video Direct Sellers is about an hour long but very information and instructive.  It will help you understand the value of getting and keeping your bookkeeping in order and help you understand what the IRS will be looking for in case of an audit.

    By the way, the IRS has created an ATG (audit technique guide) for its agents for the Retail Industry.    They include Direct Sellers in the Retail Industry.   This guide walks agents through the audit process for the Retail industry.  If interested, you can view the guide, again quite instructive.

    As usual, if you have any questions, please feel free to reach me at 240-356-5050.   To Your Financial Health!

     

  • Loan Modifications – Joy and Pain

    Last year, Charles and Gloria were giddy with happiness.  Finally, after struggling for over a year with the loan modification process, they had been approved.

    The modification would save them $700/month on their note, which equals $8,400/year.

    Shortly thereafter, they received more good news!  Their property tax bill was being reduced $150/month or $1,800/year.  The county had re-assessed their home and the value of their home had dropped.

    This was all good news… but a new problem was brewing.

    Charles and Gloria now had an additional $850/month or $10,200 to work with.  What they didn’t have now was the tax write-off that went with the mortgage interest and the property taxes!

    At our tax appointment, we discovered that they were in the 20% tax bracket.  As a result, their tax liability was $2,040 higher than usual because of the mortgage interest and property tax savings.   This was a major surprise to them.  They were still getting a refund but not as much as they had planned on.

    Charles and Gloria were blessed that they did not end up owing taxes.  Many other families may not be so blessed.

    So what should you do – Depending on your situation, here are 4 solutions

    1. Adjust your withholdings down to pay more taxes in during the year.
    2. Put more money into your 401k or 403b plan if you can
    3. Save 20%-25% of the new income to cover your taxes
    4. Some combination of all 3.

    Hopefully you’ve found this helpful.

    If you have any questions, please feel free to call me at 240-356-5050 or if you have any relevant comments on this blog, please feel to comment.

  • IRS Announces Tax Filing Delays!

    Out of a limb

    The Christmas Gift of Extended Tax Benefits may turn out to be a New Year’s Headache for both Tax filers and Tax Preparers.

    The IRS announced on Thursday, December 23, 2010 that their systems will need to be reprogrammed and they would not be ready to accept tax filings for certain forms until at least mid-February, 2011.

    Those affected include:

    • Taxpayers who claim itemized deductions on Schedule A. Itemized deductions include mortgage interest, charitable deductions, medical and dental expenses, state and local taxes.

    • Taxpayers who claim a deduction for tuition and fees. This is a so-called “above-the-line” deduction, which means taxpayers don’t have to itemize to claim it.

    Parents and students who claim other education credits, including the American Opportunity Tax Credit and Lifetime Learning Credit, will not have to wait to file, the IRS said, assuming they don’t itemize.

    • Taxpayers who claim the educator expense deduction. This deduction, which is also an above-the-line deduction, allows teachers to deduct up to $250 in out-of-pocket costs for classroom materials.

    “The majority of taxpayers will be able to fill out their tax returns and file them as they normally do,” IRS Commissioner Doug Shulman said. “We will do everything we can to minimize the impact of recent tax law changes on other taxpayers. The IRS will work through the holidays and into the New Year to get our systems reprogrammed and ensure taxpayers have a smooth tax season.”

    If you will have to itemize for 2010 or have tuitions and fees to be deducted, plan your finances now to anticipate the delay in possibly receiving a refund.

    If you have any questions, please feel free to call me at 240-356-5050 or if you have any relevant comments on this blog, please feel to comment.