Wacky but real – can you take these deductions also?

We always hear of wacky things that people try to deduct from their taxable income – these happen to be deductions that, surprisingly so, worked.
When I was in high school, I was trying to decide between art school and business school. I decided I did not want to be a starving artist – who knew that if I went down that path, I could have this deduction:
If you are a “performing artist,” you may be able to deduct your business expenses if you have at least two employers. If each has paid you at least $200, and your expenses are 10% of what you make, you can take a deduction if your AGI is less than $16,000.
Are you a cat lover? This may work for you;
A couple bought cat food for feral cats that congregated at their junk yard. The cats help keep the rat and snake population down, making the junk yard safer for customers. The couples argued this before the IRS and were allowed to keep the deduction.

In this case, beer and gasoline do go together:
A gas station owner offered free beer with a fill-up. The owner’s sales increased a lot and in Tax Court the owner argued successfully that the cost of the beer was a business expense.

You can get creative, to a point with your deductions, but make sure you consult a tax professional if you will be pushing the envelope with your own wacky deduction.


We are better than you! At least when it comes to investing.

According to Fidelity Investments, female investors have outperformed male investors in the past decade. We are not selfish, so I will share with you some of the reasons why we invest better than our male counterparts.
We tend to be more patient than male investors. When investing, we tend to take a longer view of the goals. We will buy and hold a stock or mutual fund longer with the attitude of investment + saving for our families.
Because some of us are getting married later in life, getting divorced, or finding ourselves widowed at a young age, we can’t rely on guys to handle our finances. We will talk to people, seek out professional help, and read to learn what we need to know about investing.

We don’t outperform you by a lot year over year, but a win is a win!


Suddenly single – what to tackle first.

Whether you find yourself suddenly single due to death or divorce, the weight of becoming solely in charge of all financial decisions can be overwhelming. Here are a few key places to start:

Establish an emergency fund. Look at your immediate expenses and then the gap between those expenses and your monthly income. This will give you a guideline amount to start stashing away until your emergency fund is about 3 times that figure.
Update all of your beneficiary designations. Make sure you change the beneficiary on your retirement plans, life insurance, and bank accounts. Make sure you change the primary and contingent beneficiary.

Look at your tax picture to determine how to file your taxes. Will you deem yourself as “married filing separate”, “Single filer”, or “Head of household.” Find the filing designation that will benefit you most.

Take care of your legal designation such as; who has your power of attorney? Who can make medical decisions on your behalf? Who would handle your estate?

Most important – do not forget to take care of yourself. If you do not, you will not be any good to those you love.


These red flags can cost you some green.

Who doesn’t love tax time! So many colorful thoughts and words come to mind. Here are some RED flags for you to avoid so you do not spend any extra GREEN:
1. Making simple errors can cost you such as math errors or forgetting to include necessary forms.
2. Inflating you charitable deductions can raise the red flag. Being charitable is wonderful on so many different levels but remember this, many charities report donations received to the IRS. Also, if your charitable donations seem significantly higher than those in your tax bracket, you will attract attention.
3. Not facing the fact that it is a hobby, not a business. If you cannot be profitable 3 out of 5 years, your business may be deemed a hobby by the IRS.
Take your time while compiling your tax return so you keep all of your green.


We need to date a little bit first.

This is what a new client said to me recently, and I don’t have a problem with it. My new client has been a widow for three years, and has done nothing with her assets or those she received from her husband. She finally feels ready to move forward and had asked me to look at her situation. She has accounts everywhere, with many different titles and tax considerations. I initially asked her to provide basic financial planning information to me; a list of the accounts, an expense summary, and a lot of discussion about her hopes and dreams going forward. After a few meetings, she decided she would like me to help with the management of her investments, but not all of them right now. This is where the dating begins.
She wants to get comfortable with our process, learn how to confidently read her new statements, learn to live with a new cash flow plan, and deal with taxes. She has one account that came to her in a wacky manner that caused her to pay a lot in tax up front, plus, she is paying too high of a management fee in my opinion. This is the one account she did not want to move to my management as of yet, we have not dated long enough. I do not have a problem with this; I did suggest that she ask for a reduction in management fees from her current financial advisor.
Getting to know your client and advisor through the “dating” process can lead to a very long and successful relationship.


Does .61795% sound like much to you?

It’s a funny number – isn’t it? This is the number that was listed as the very small compensation to be paid to an agent proposing an annuity for a client. The actual statement is “will pay financial advisor a commission based fee equivalent to .61795% of the deposit annually over the 10yr. period of the annuity”. This 10 year annuity, that the agent also quotes an average annual return of 3%, was suggested for a client under 24/7 care with annual expenses of $75,000. The actual amount as a suggested deposit was $750,000 with the ability to withdraw 10% annually to meet the care needs without being charged a penalty. What this annuity does not allow for is liquidity of the principal in case there is an emergency beyond the 10% annual withdrawal. While this financial advisor addressed the current cash flow needs, there was, in my opinion, no forward thinking for the unknown.
By the way; the low compensation of .61795% is equal to $96,400 in the first three years – not such a funny number – is it?


Do things “old school” when it comes to filing your tax return.

Every year I get a call from a client stating that their identity has been stolen. This generally occurs right after they have efiled their tax return. I am not a fan of efiling, here is one reason why: last year the IRS rejected or suspended the processing of 4.8 MILLION suspicion returns. So far, 1.4 million have been confirmed as identity theft returns.
For this one piece of paper, for this one instance, make friends with the post office again. Mail your tax return the old school way – lessen your chances of identity theft.


We are more than just numbers.

Most of you that have investments have recently received your end of year reports. I know that the first thing you look at is your total return. You want to know how did you do, or more correctly, how did we as CFP® professionals, do for you. We know this is important, but we are so much more than that for you.
We want to know how you are living your lives right now. What type of family obligations, celebrations, illnesses, and plans do you have on your plate for which we can help you plan. We want to know what your dream retirement looks like so we can help you plan for that. Recently, I met with a couple that is going through some big lifestyle changes, the husband is now disabled, their oldest son is getting married, and their daughter has two more years of college. All of this takes planning with regular reviews and updates for these lifestyle changes. We hold your hands, we cry with you, and many times we get to celebrate with you.
Financial planning is all encompassing, it is our passion. Yes, we are also concerned with the numbers – but we are more concerned about you, the person.


Can you make money from pot?

As of now, there are 20 states that have approved medical marijuana and8 more that have approved recreational as well as medical use. So, is there an opportunity to profit? There are a number of companies out there that are getting their newsletters out as fast as they can so you can invest in this emerging industry. Do you remember the Y2K panic? How about the Dot-Com bubble? This is another case where you should take a step back. All I have seen available is buying penny stocks in the pot industry and the related companies. In my opinion, this is not a good way to invest. The penny stock business was huge a number of years ago and has virtually been dead until now. There are still a lot of Federal regulations that need to pass in order for income from the pot industry to be deposited legally.
This is a classic case of “if it sounds too good to be true”.