Three Retirement Pitfalls to Avoid

We all know it is coming. We all try, as best as we can, to prepare for it. When it happens, all but a few are truly ‘comfortable’. That’s right; retirement is but a few short years away for many of us in the Miami area. Hopefully you started planning for retirement long ago. If not, don’t worry; taking positive steps now will help you later. While making those steps, knowing what pitfalls to avoid will truly make a world of difference in your golden years. Below are some of those pitfalls you should watch out for.

1. First, consider yourself lucky you live in Florida. Everyone knows many people come to Florida in order to retire, and have done so for many years. The weather, the services, and the available infrastructure for senior citizens make Florida a great place for retirement. Also, Florida offers cheap(er) tax rates than a lot of other states for retirees. If you plan to stay in Florida, you have avoided pitfall #1. If you plan on leaving, you should take the state of your future home’s tax rate into consideration. You simply may have to save a little more, or spend a little less, each month.

2. If you recently moved to Florida in order to start your retirement, but still own a home in another state, are you claiming losses, repair costs, and interest rate deductions on both homes properly? Many Americans cannot sell their old homes due to the ongoing real estate crisis. If you are one of those Americans who, for whatever reason, still own two homes, be sure you are not paying more on taxes than you should.

3. If this is your first year of retirement, and you typically do your own taxes, try paying a visit to a Miami tax preparer this year. Having your taxes filed, at least during the first year of retirement, can give you a baseline as to how to file your taxes in the future. Regardless if you take in a little side-income you must claim, or pension and Social Security earnings only, an accounting service in the Miami area can help you plan and spend accordingly.

Retiring is a scary thought for many Americans today. Some have saved and planned a little better than others. Don’t keep making the same mistakes today which will keep you from living out a comfortable retirement. Contact an accounting service in order to learn more about what you could be doing in order to secure your retirement.

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Three Ways to Catch Up On Your Retirement Savings

Many Americans retire each year. With the number of dwindling and secure pensions, have you saved enough for retirement? The days of the 30 or 40-year pensions are all but gone, leaving people to rely on Social Security and Individual Retirement Accounts (IRA). For those relying to Social Security alone, you may want to see exactly how much you will make per month after retirement age.

Was the amount more, or less, than you thought it would be? For a large percentage of Americans, the amount may not be as much as you thought. The only way to ensure your comfort in retirement is to save now. Below are three strategies to catch up on your retirement savings.

“Spend less and save more” is sage advice you may as well have received from your grandfather. Easier send than done is perhaps the most common response. The trick to spending less is to discover where all of you money goes each month. Once you have an accurate synopsis of where your money goes, only then can you start saving it. For example, if your dining-out budget is $200 each month, cut it back to $100 and save the remainder. That $100 you save this month on fast food might be worth $500 when you go to retire. Honestly, did you really need that McSandwich anyway?

If you have not done so already, start an IRA (traditional or Roth) account with a reputable provider. If you already have an IRA, divert as much earnings as you can each year. If it helps, set up a direct deposit to go directly to your IRA each payday. Doing so will not give you a chance to ‘miss’ the money you are sending off. Maximizing your contributions will have you sitting pretty at retirement age.

Lastly, start budgeting for your retirement now. Come up with an estimate on how much you will need each month, where you want to live, do you plan on moving out of state, and other similar questions. Doing so will leave you better advantaged on how aggressive you will need to be with you savings.

Saving money and budgeting is difficult, especially if you don’t know where to start. Consider consulting with an accounting service in the Miami area. An accountant can help you set up an IRA, prepare taxes, and give sound financial advice. Let’s face it, we all wish to maximize our saving potential so we can retire in comfort and, perhaps more importantly, style; an accountant will get you there.

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Four Practical Tips From a CPA That Can Save You On Your Taxes

The 2014 tax season is over with. Hopefully you filed your 2014 taxes and received a large refund check. If you didn’t get that check, perhaps next year will be your year. Below are four practical tips which might have you seeing green for the 2015 tax season.

1. This is the year you should finally start keeping your receipts. As we sit and try to do our taxes we know what qualifies as a deduction, but we never know exactly how much we spent on a given item. Also, having receipts for any donations you made will come in handy. When you choose to keep a receipt, be sure to write why you are saving it on the back. Doing this simple task can save you a headache the next time you file your taxes.

2. If you will be looking for a job this year, be sure to keep track of all of your job hunting expenses. If you will be spending money on résumé writing services, employment agencies fees, transportation costs, printing, postage, and the like, keep a record. No one ever really realizes just how much looking for a job can cost; that is until they add their receipts up.

3. If you are self-employed, there are a number of tax deductions you will be eligible for next year. The most important aspect of self-employment and taxes is to make sure you keep impeccable records of your transactions and expenses. Also, keep in mind you might consider making estimated tax payments throughout the year instead of all at once at the end of the year. Estimated tax is used to pay tax on income not subject to withholding.

4. If you want to receive your refund check faster next year, file your taxes electronically and opt for direct deposit option. True, at this point in time, most people already perform this function. However, you may be surprised at how many people are still using snail mail in order to receive their refund check.

The tax code changes every year. Have you ever wondered why you can’t use that tax filing program you purchased last year and this year’s taxes? If you did so, you might be headed for an audit by the IRS. Consider consulting with an accounting service in the Miami area in order to maximize next year’s return.

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Seven Last-Minute Tax Filling Mistakes People Make

The federal government has an uncanny ability to find even the most minute tax mistakes you may make. With more and more tax audits occurring each year, be sure these seven common mistakes below don’t land you under the microscope of the IRS.

1. Perhaps the biggest mistake people make is forgetting the tax deadline and filing late. Even by being only a few days late with your filing with have you paying out of pocket.

2. Another mistake individuals make is not collecting all of the required paperwork in order to do you taxes properly. Sure, W-2s are a no-brainer, but are you so sure you have all of your needed 1099s? Miscellaneous income you earn is independently sent to the IRS via a 1099, so you are not doing yourself any favors by under reporting your income. Make sure you account for all income to avoid an audit.

3. Not that you would be penalized for doing so, but if you want your return sent directly to your bank account, be sure to list the proper routing and account number. Nothing more frustrating than waiting on a tax return check which was sent to the wrong location.

4. If at all possible try to slip a few more dollars into your retirement account before filing. Nothing like reducing your tax burden by putting your hard earned dollars to work.

5. If after doing your taxes you find you owe money, don’t panic! Simply not filing your return is not the answer to this conundrum. If you cannot pay right away, the IRS will take payments over time.

6. If you need help with your taxes, but don’t want to pay to have them done, some individuals may qualify for free help. If a person earned less than $50,000 and is filing a simple tax return they can call 1-800-906-9887 to find out more information on the program.

7. Lastly, don’t forget to take all of the deductions you qualify for. There are a number of deductions some people have never considered. For example, one can take a deduction in regards to their gambling losses. Of course there are a number of steps you must take in order to prove your gambling losses, but a deduction may exist for that $1.00 scratch off lotto ticket you lost on back in June.

The IRS is a large organization which oversees the filings of millions of people’s taxes each year. Don’t make the mistake that they do not care about one individual not filing their taxes. Ask the millions of people who have been audited in the past few years, they will tell you the IRS cares about everyone!

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Obamacare’s Individual Mandate Tax and You

Regardless of your feeling towards the Affordable Care Act, otherwise known as Obamacare, there are a number of new taxes which coincide with Barrack Obama’s signature piece of legislature. The taxes may affect some more than others.

There are dozens of new taxes which accompany Obamacare. Some are big, some are small. Some will likely not even affect you, some certainly will. The number one tax most people are concerned with is the ‘individual mandate’ tax. The individual mandate is the tax penalty which requires a person to purchase healthcare coverage. Much has been made of the individual mandate and how it affects Americans. Most people do not realize the tax involved with the individual mandate increases over time. Below is a breakdown of the individual mandate tax over the next several years and beyond:

  • 2014 – $95 per person per year or 1% of your Income
  • 2015 – $325 per person per year or 2% of your Income
  • 2016 – $695 per person per year or 2.5% of your Income
  • 2017 – Tax Penalty will increase by the rate of inflation going forward, or 2.5% of your Income

As you can see, there are two penalty options per each non-covered year. Whatever dollar amount is greater is the dollar amount the government will tax you. So, in the year 2014, a single uninsured individual earning $30,000 a year will have to pay a $300 individual mandate tax if they do not obtain health insurance. If the same individual does not obtain health insurance by 2016, they will have to pay a $750 individual mandate tax.

The total penalty cannot exceed the amount it would cost you to obtain the most affordable health insurance plan. Meaning, if an Obamacare “Bronze Plan” cost $800 a year for you, the total tax penalty could only be $800. There are a number of nuances which surround the individual mandate. Each tax payer seeking coverage, or not seeking coverage for that matter, will wind up paying a different amount. Factors include income, family dynamics, and employer to name a few. Obtaining coverage online varies by state, and has been problematic thus far. There are telephone service centers which will walk a person through the process so they may obtain health care coverage.

Obamacare may not be the most agreeable program in America at the moment, but it is here to stay for the foreseeable feature. The only thing certain about taxes is there will always be more, never less, to get used to.

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5 Tax Tips for Retirees

Retirees, and those about to retire, face some daunting tax questions and dilemmas. Depending on how much you have prepared for retirement will increase your enjoyment during retirement. Unfortunately, no two retirements are the same. Regardless if you are living on a pension, social security, investments, or a combination, below are some tips a retiree will benefit from.

1. Choose the state you live in wisely. All states have different ways of taxing retirees. For instance, California and New York are considered non-tax friendly, while Arizona and Florida are considered tax friendly. The differences include: sales tax, tax on social security, property tax, income tax, and inheritance tax. Be sure to do your research, the different tax burdens state-to-state can be in the thousands of dollars.

2. While keeping the above tip in mind, choose a state which does not tax your social security earnings. Some retirees only have their social security to live off each month. Living in a state such as Nebraska or Minnesota which tax social security, may be too much for a retiree to handle.

3. Reassess your living situation. Some individuals enjoy a large home, some look for amenities, while others value a country over city living. If you prefer a large home, know a significant portion of your retirement will go towards maintenance, care, and property tax based on square footage. The size of your home is a completely personal decision, but base it off of your needs verses your desires. Shaving a few thousand dollars off of your property tax bill can make a huge difference.

4. Take advantage of credits and deductions during your yearly federal tax filings. Leaving “money on the table,” as some may say, could greatly affect your bottom line. If you usually do your taxes yourself, consider utilizing a tax preparing service during your first full year of retirement. By doing so, you will have a baseline tax return for future years. This professional prepared filing will show you ways on how to make these deductions, which may prove useful in the future.

5. Lastly, and if you have money to spare, give it away! This may sound counter intuitive, but you will receive tax benefits from gifting or donating your retirement money.

Again, no two individuals will be in the same retirement situation. What will be good for you may not be good for your neighbor. However; one thing no individual has ever been harmed by is having a solid retirement plan.

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Why Americans Struggle to Save

It has been well documented American’s have had a difficult time in terms of saving money. Regardless if you are saving for a down payment on a home, or retirement, Americans are having an increasingly difficult time. The possibilities and reasoning behind these difficulties are numerous. Below are several reasons which continually hamper our saving aspirations.

Over The Limit
It is quite obvious some Americans simply live outside their means. Do not confuse this as an individual not making enough money. A person who lives outside of their means typically will purchase a flashy home or car. They will have the latest and greatest phone or gadget which they are always replacing with “the next big thing.” They dine out regularly and sabotage their savings frequently.

Over Estimators
Individuals, especially those saving for retirement, may overestimate their savings and pensions. If an individual is saving for retirement, they may want to speak with a financial planner who is well versed on the subject. A financial planner will help you meet your goals.

Credit Junkies
Americans have an unhealthy obsession with unsecured credit debt. It is not uncommon for individuals to have three or four credit cards in their wallet. Some of these credit cards have interest rates approaching thirty percent. If an individual is to have any hope of saving money, they will have to first get from under any credit debt they may have.

Easy Access
At no point in history have Americans had such easy access to the money in their bank accounts. With an ATM machine on every corner and a debit card in every wallet, we spend money like mad. Checks are a thing of the past. No longer do we have to endure the pain of writing out a check. Today, the swipe of a card means money in our pocket. Such easy access to cash means our savings dwindle.

Though the above reasons may not particularly pertain to you, they pertain to many Americans. Some estimate two out of three American have deep concerns in their retirement savings. The American credit debt, though down, is still close to a trillion dollars. Even our federal government has a difficult time in terms of relying on credit debt. The point is, everyone is in the same boat together. Build a spending plan and stick to it. You will be on your way to saving for that Jet Ski in no time.

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4 Tax Penalties and How to Avoid Them

It is not easy to file your own taxes. In fact, when you run a business or have more than just the standard deduction, you will run into problems if you make one or two slight errors. While this is true, most issues are largely avoidable provided you know what you are doing and what to avoid. With this in mind, here are four tax penalties and how to avoid them.

Underpayment of estimated tax
Now, when filing, some people will need to pay their taxes as they go. This is often the case for retired people or entrepreneurs who run their own companies. For this reason, it is wise to pay the right amount as the IRS will penalize a consumer severely. Of course, if you have sporadic income, you can pay in four equal amounts to avoid penalty. Either way, when paying too little in taxes, you are going to have to deal with the repercussions. For this reason, if you are in a constant battle with the IRS over this, you should consider hiring a professional who can make the estimated tax payments on your behalf. Otherwise, if this problem reoccurs, you will have to pay the penalty again.

Late filing
Believe it or not, even with all the technology available, many still file too late. When this happens, you will have to pay a penalty in many cases. Other times, if you did not make enough money or paid all your taxes through your employer, you may skirt by untouched. With that being said, it is wise to file on or before the filing deadline. Remember, while it is easy to procrastinate, it is not a wise thing to do too much as it is costly to file too late. Instead, when you receive your tax documentation, you should do a quick estimate on how much you will owe. Then, if you will receive a refund, you should file quickly and get your money. On the other hand, if you owe, you should fill out the forms and send them in the last possible day.

Home office deductions
While working from home, you can write off some home office costs. However, this is a tricky subject and it is wise to talk to a CPA who can advise you on your best course of action. At the same time, when using this deduction, you should remember to save your receipts and keep everything in perfect order. You must realize that the IRS cracks down on this, and you should keep perfect records. At the same time, if audited, you should be prepared to explain your situation and fight for your rights as an agent will listen if you provide the right information.

Math errors
If you make a huge math error, you may end up paying some more to the IRS. If you use a program or online-based filing service, you should not experience any issues. Of course, if you use a pen and paper, you should double-check your math and ensure there are no issues. Luckily, if the error is minor, you should only have to send in the extra money.

Without a doubt, people make mistakes when dealing with the tax authorities. If you can avoid these four common pitfalls, you can avoid any penalties.

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10 Tax Filing Mistakes to Avoid

We’re in the middle of tax season, and you may already have received a refund. If your process isn’t complete, avoid these common tax filing mistakes.

1. Not filing at all is illegal an can lead to fines. You’ll also lose out on tax refunds when you don’t file.

2. Filing too late can be costly. Prepare all your documents in January so you have plenty of time to file taxes before the April deadline. Collect receipts, W2s, 1099 forms and other paperwork, including rent certificates, well ahead of time. If you need an extension, apply for one to avoid fines.

3. Filing taxes yourself works fine when you have a simple return. However, complicated returns, small business owners and other situations require a professional.

4. Forgetting all the possible credits — claiming yourself, homestead credits and even tuition tax write-offs — can severely shrink your refund. This is especially important when you work from home.

5. Remember to add any donations to charity as write-offs on your taxes. Most charities will provide you with a receipt for your records, which you should make sure to file away safely until tax time.

6. However, lying on your taxes or writing off items such as that new car or television that aren’t actually deductible can lead to an audit by the IRS. You can make it easier by separating business and personal finances through separate accounts or creating an LLC.

7. Furthermore, make sure to add all of your income, even if it was in cash. Bloggers have learned the hard way to report any revenue over $25, and even items given to you in return for your work count as payment. Similarly, alimony and prize winnings must also be reported on your taxes.

8. Math errors can lead to greater fines or shrink your refund. Double-check your math. If math isn’t your strong suit, have someone else look at it. This might be the time to consider hiring a professional.

9. Double-check the spelling of your name, and ensure that your name is correct if you’ve recently changed it. New spouses often run into glitches because of a name change. Otherwise, the IRS might take longer to process your tax return.

10. Lack of or poor organization when it comes to taxes can be costly because you may have to file late or retrieve copies of paperwork before you can file.

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How to Do Your Taxes if You’re Paying Tuition

For those parents who feel that children are a blessing, here is yet another reason to see them as so. Parents who pay their child’s college tuition will be happy to know that thanks to Uncle Sam, they can receive education credits and tax deductions on tuition and fees, room and board, books, supplies, student loan interest payments, qualified student loan payments, and more, for a qualifying child enrolled in college.

Who Qualifies?

Students who are:

  • Full time students
  • Under 24 years of age
  • Provides less than half of his or her own support
  • Filing as single or married filing separately

  • Adults who are:

  • Paying yourself through school
  • Spouse paying for your partner’s grad school

  • Student Loan Interest Deduction

    Up to $2,500 of your student loan interest can be deducted on your taxes as long as: (1) the individual’s adjusted gross income isn’t more than $75,000 for a single person and no more than $150,000 if they are married, (2) their filing status is not “married filing separately, and (3) they can’t be claimed as a dependent on their parents taxes.

    Lifetime Learning Credit

    Parents may be eligible to claim up to $2,000 of the lifetime learning credit for qualified students enrolled in an eligible institution as long as; (1) they pay qualified education expenses for higher education, (2) the eligible student is yourself, your spouse, or a dependent the parent claims an exemption for on their taxes, and (3) parents pay education expenses for an eligible student.

    American Opportunity Credit

    If parents pay eligible college expenses for themselves or a qualified student, and they are single with an AGI less than $80,000, less than $160,000 for married couples, they may be eligible for a maximum annual credit of up to $2,500 per student.

    How to File

    Even if the parent or the parent’s child/children meet the requirements for both the Lifetime Learning Credit and the American Opportunity Credit, they can only receive one of them for each student in the same year. Parents can, however, spread the credits amongst qualifying students and alternate between them each year. According to the IRS, when doing your taxes, individuals should compare the tuition fee deductions they or their children qualify for to see which gives the biggest break then claim that credit on their tax return.

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