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Get more from your tax refund

Before spending your tax refund – you might consider investing your refund
or using it to increase your financial security.

While everyone’s needs are different, here are some optional uses of your refund that may work for you.

Contribute your refund to your employer’s 401(k) plan. If your employer offers a matching contribution, that’s an immediate return on your money in addition to deferring taxes on your contribution. And, funds in the plan grow free of tax until withdrawal.

Use your refund to pay down credit card balances – you could earn a double-digit return.

Consider investing your refund in your child’s education. Both Section 529 college savings plans and education savings accounts offer tax-advantaged ways to save for college costs.

Take full advantage of your IRA options for retirement savings. Both Traditional and Roth IRAs are great ways to save for retirement.

If you’ve maximized your retirement and education savings, and your credit cards are under control, put your refund in diversified investments that make sense for your age and financial situation.

Ask yourself if getting a big refund every year is a smart idea. Would you rather invest your money during the year instead of making an interest-free loan to the government? If so, consider filing an updated Form W-4 with your employer.

Establish these retirement plans

You still have time !

The problem with time is that you always think you have enough. And yet fall is already here, and the time for establishing a retirement plan for your business is ticking down to the deadline. Here are two plans with upcoming due dates.

  • Savings Incentive Match Plan for Employees (SIMPLE). The deadline for setting up a SIMPLE for your business is October 1. SIMPLEs are easy to establish and maintain. You can use an IRS “model” document to set up your plan, and you’re not required to file an annual retirement plan return with the IRS. Your business can deduct contributions made on behalf of employees. In addition, you may be eligible for a credit of up to $500 to offset the cost of establishing a plan and getting your employees enrolled.

    The maximum contribution for SIMPLE plans in 2016 is $12,500, plus an extra $3,000 when you’re over age 50.

  • Simplified Employee Pension plan (SEP). If you’re a sole proprietor and you requested an extension of time to file your tax return, the last day to establish and fund a SEP is October 17. You set up a SEP by signing a plan document such as IRS Form 5305-SEP, Simplified Employee Pension – Individual Retirement Accounts Contribution Agreement. Contributions are deductible, and you don’t have to file an annual return with the IRS.

    For 2016, the maximum contribution is $53,000.

Not sure which plan will suit your business? Contact us for a detailed comparison.

Check your financial fitness

How can you become financially fit? Here are suggestions for improving your fiscal muscles.

Get your budget in shape. Use your spending history to create a meaningful budget, then stick to it. Resolve not to spend more than you make, and remember that what you “make” is your take-home pay, not your gross salary. Budget for savings too. Pay yourself first. Set up a minimum monthly amount that you put into savings at the same time you pay your other bills.

Slim down your debts. Where possible, consolidate or refinance existing debt with more favorable terms. Concentrate on eliminating personal debt first because interest you pay on personal loans generally has no tax benefit.

Build up your benefits. Review your employer’s benefit package. Are you participating in every program that you can? Employer plans generally have favorable tax benefits that will make your dollar go further.

Tone your investment portfolio. Do your investments fit your current financial situation, age, and risk tolerance?

Strengthen your insurance coverage. Do you have adequate coverage for property, disability, life, and health? Avoid overlapping or excessive coverage.

Coordinate your estate plan. Does your will allow your assets to pass according to your wishes? Have you provided for guardianship of your minor children if something happens to you? Do you have a power of attorney that will give a person of your choice the ability to act for you in the event you are unable to act on your own behalf? Have you completed a health care proxy or living will?

Maintain your recordkeeping. Set up a recordkeeping system that tracks the income and deductions reported on your tax return so you can capture all deductions you are entitled to take.

Maintaining financial wellness, like physical wellness, is a continuous process. The sooner you start, the more likely you are to succeed. Schedule a meeting with us for assistance in reviewing your tax, financial, and estate plans.