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.

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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.

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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?

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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.

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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.

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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”.

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If you have ever received a letter from the IRS, your first instinct is to throw up. You panic, you wonder what you may have done wrong, and then you wonder if you should hire professional help. Well, the IRS wants to change our opinion of its department.
The IRS wants to change from an attitude of audits and enforcement to one of outreach. Yes, I said outreach. Over the last two years anyone who has tried to call the IRS to ask a question has been put on hold for more than 30 minutes, and only 53% of the questions we asked have been answered. To quote the current thought process, the IRS is thinking about striving “to create an environment that encourages taxpayer trust and confidence, the IRS must change its culture from one that is enforcement-oriented to one that is service-oriented.”
We have a new administration starting in a few days, along with a new congress, so who knows what might happen.

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While many taxpayers have payroll deduction retirement plans, it does not necessarily prevent you from making a deductible IRA contribution. If you are married filing a joint return and your adjusted gross income is between $98,000 – $118,000, you can make a partial or completely deductible IRA contribution for 2016. For single tax filers, their phase-out bracket is $61,000 -$71,000. If you are self-employed, the limits are even broader if you open a SEP IRA. For 2016, you can contribute 25% of your adjusted gross income up to $53,000.
You have until April 18, 2017 to fund a Traditional IRA, and up until the date you file, including extensions, which end October 18,2017, to fund your SEP IRA.
Put the funds in your pocket vs. that of the IRS for 2016.

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Q: I turn 70.5 years old in June of 2017. Can I still transfer funds directly from my retirement account to a charity and have that count for my Required Minimum Distribution?
A: Section 408(d) (8), was made permanent allowing for your Required Minimum Distribution to be paid directly to a qualified charity. Not only that, as the funds go directly from your retirement account to the charity, they are not included in your adjusted gross income for the year. You can transfer as much of your RMD to a qualified charity as you wish and you do not have to have any of the RMD amount paid directly to you if that is your wish.

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