Tax Tips for Newlyweds

The tax implications of marriage are probably not the first thing on the minds of most newlyweds, but paying a little attention to it now can save time and even money later. Here are a few tips to help those who are about to embark on a new life together.

Tip 1: Notify the Social Security Administration with any name change(s). The IRS has a name match program with the SSA and will potentially reject deductions and joint filing if the name change is not made timely. Do this by filing Form SS-5 with the SSA.

Tip 2: Use Form 8822 to update your address with the IRS if either of you is moving.

Tip 3: Change your name and addresses with your employer and the Postal Service to ensure your W-2s are correctly stated and delivered to the proper address.

Tip 4: If selling one or two residences, make sure you review how capital gains tax laws apply to your situation. This is especially important if one of you has been in your home for only a short time or if either home has appreciated in value.

Tip 5: Review legal documents to ensure legal titles are as you wish them to be. This includes bank accounts, titles on property, credit cards, insurance policies, and living wills.

Tip 6: Recalculate your payroll withholdings and file a new W-4. If both newlyweds work, your combined income could put you into a higher tax bracket. This phenomenon is referred to as “the marriage penalty.” By changing withholdings now, you can avoid a big surprise at tax time.

Tip 7: Review your employee benefits and make necessary changes in health care, insurance, retirement account beneficiaries, and tax-preferred spending accounts. Marriage is a qualified event to make mid-year changes by most employees.

If you or someone close to you has questions about marriage and taxes, give us a call. We’d love to help.

Building Customer Loyalty – A Few Basics

If your company isn’t showing your customers you care, it’s time to get back to the basics. Your company’s survival depends on it.

Studies have shown that businesses often spend five to six times more to attract a new customer than to keep an existing one. Over the long term, those dollars add up. In fact, a company’s ability to care for its customers often determines its survivability in the marketplace. Make customers happy and they’ll stick with you; disappoint them and they’ll tell their friends.

Building customer loyalty is a matter of focusing on the basics. Does your company need to refocus on any of them?

Hire friendly people. You have probably visited a business where you encountered a grumpy salesperson or a bashful receptionist. Unlikeable staff will not generate repeat business. The staff you employ should enjoy interacting with people. If your employees regularly hide out in the back room instead of greeting clients, it’s time to take a hard look at your hiring practices.

Request customer feedback. This can be as simple as spending a few minutes with a customer to inquire about his or her experience with your company. Be specific. Instead of asking “How was our customer service today?”, ask a more specific question like, “Did our salesperson answer all your questions about XYZ product?” You might also establish a focus group of customers to solicit ideas for improving your products and services.

Follow up. If customers spend valuable time providing their opinions via surveys, suggestion boxes, or focus groups, don’t ignore what they have to say. Let them know that you take their ideas seriously and are looking for ways to implement at least some of their suggestions.

Never stop training. Often employees treat customers rudely or disrespectfully because they simply lack training in proper etiquette. Show them the proper way to answer phone calls, how to make eye contact and smile, how to help without being pushy. With a little focused training, most people can learn good customer service skills. Take time upfront to develop these skills in your employees and you’ll reap dividends in customer loyalty.

Model proper behavior. Simply put, the boss should exemplify top-notch customer service. If your employees see you treating clients poorly, don’t be surprised if they assume that such behavior is acceptable.

Remember: it’s easier to keep an existing client than to beat the bushes for a new one. It’s cheaper, too.

IRS file

What You Should Do When the IRS Contacts You

Has the IRS questioned something on your tax return? Ignoring it is not the proper course of action.

After you file your tax return, the last thing you want to see is a notice from the IRS questioning your return. Some IRS notices involve very minor changes, like a correction to a Social Security number. Some are for serious changes that could involve a lot of money, such as a billing for more taxes, interest, or penalties due for an adjustment to your total tax liability.

So, what should you do if you get a letter from the IRS?

Here is a list of do’s and don’ts concerning contact from the IRS.

  • Don’t ignore the notice; the problem will not go away.
  • Act promptly. A quick response to the IRS may eliminate further, more complicated correspondence.
  • If you agree with the IRS adjustment, you do not need to do anything unless a payment is due.
  • If the IRS is requesting more money or a significant amount of new information, be sure to contact your tax preparer immediately.
  • Always provide your tax preparer with a copy of any IRS notice, regardless of how minor it appears to be.
  • Keep a copy of all the IRS correspondence with your tax return copy for the year in question.

Often taxpayers experience anxiety when they receive correspondence from the IRS. Don’t worry. The most important thing to remember is not to ignore the IRS. Bring any notice you receive to our office and let us assist you in resolving the problem quickly.

Answers to Common Questions After You File Your Tax Return

You have filed your 2016 tax return, but you probably still have questions. Here are a few of the most common post-filing questions the IRS answers.

  • How can I check the status of my refund?

You can go online to check on your refund if it has been 24 hours since the IRS would have received your e-filed tax return or four weeks after you mailed your paper return. Go to www.irs.gov and click on “Where’s My Refund?” You will need your Social Security number, your filing status, and the amount of your tax refund.

  • What records should I keep?

Keep receipts, canceled checks, or other substantiation for any deductions or credits you claimed. Also keep records that verify other items on your tax return (W-2s, 1099s, etc.). Keep a copy of the tax return, along with the supporting records, for a minimum of seven years.

  • What if I discover that I made a mistake on my return?

If you discover that you failed to report some income or claim a deduction or tax credit to which you are entitled, you can correct the error by filing an amended tax return using Form 1040X, Amended U.S. Individual Income Tax Return.

  • What if my address changes after I file?

If you move or have an address change after filing your return, send Form 8822, Change of Address, to the IRS. You should also notify the Postal Service of your new address so that you’ll receive any refund you’re due or any notices sent by the IRS.

For answers to other tax questions you may have, give us a call.

June 15 Tax Filing Date for US Citizens Abroad

U.S. citizens and resident aliens living overseas or serving in the military outside the U.S. receive an automatic two-month extension of the regular tax filing deadline. If this extension applies to your living situation, you have until June 15, 2017 to file your 2016 tax return. To use this automatic two-month extension, you must attach a statement to your return explaining that you live overseas or you are serving in the military outside the U.S.

Know When to Sell

Deciding when to buy a stock is often easier than determining when to sell. As you’re reviewing your portfolio at year-end, consider these situations that may indicate the right time to sell.

When there are no tax consequences. If you hold stock in a retirement fund, you may want to reap gains with no tax impact.

To take money off the table. If a stock has had a nice run, you could sell a portion to recoup part of your investment. You can continue to invest in the stock but with locked-in gains.

A shift in fundamentals. Consider selling if the economy changes or an entire industry becomes vulnerable due to negative news.

When you’ve given up on a stock. If a stock has been declining or flat-lining for an extended period, selling low now can save you from having to sell even lower later on.

To take a contrarian position. If the market has gotten frothy and all the news is optimistic, choosing to harvest your gains could be a wise move.

When cash becomes attractive. A gloomy economic outlook could be reason to increase your cash reserves.

Having a disciplined selling strategy means giving as much thought to the sale of a stock as to the purchase. Contact us. We’re here to help.

Don’t Include the IRS on Your Gift List

Suppose a relative gives you an expensive painting. Several years later, your relative dies and you decide to sell the painting. Your accountant says you’ll owe capital gain tax on the sale, and asks for your basis in order to reduce the amount on which you’ll pay tax. What’s your answer?

When you sell property received as a gift, the general rule is that your basis is the donor’s cost basis. If you sell at a loss, your basis is the lower of the donor’s basis or the fair market value on the date you received the gift. These numbers are adjusted in some cases. But without cost records, you have no way of proving the donor’s basis and no way of saving yourself tax dollars.

If asking for records of the cost when you receive a gift seems inappropriate, explain why you want to know to help make the conversation less awkward. No one likes to pay unnecessary taxes. Having the same conversation about the cost of valuable gifts you received in prior-years is also worthwhile.

If you’re the gift-giver, offer the additional gift of presenting the cost records to the recipient at the same time. Otherwise, you may end up giving an unintended gift to the IRS in the form of unnecessary taxes.

How Social Security Benefits Are Taxed

Are you wondering if your social security retirement, survivor, and disability benefits will be subject to federal income tax on your 2016 return? Generally, when these benefits are taxed is determined by your “provisional income.”

Provisional income (PI) is the product of a formula used for no other purpose than figuring out the taxable percentage of social security benefits. To compute your provisional income, total your adjusted gross income, any tax-exempt interest or similar nontaxable revenue, and one-half of your social security retirement benefits for the year. How much of your benefits are taxed depends on this “base amount.”

– Joint filers with PI below $32,000 ($25,000 for single filers) owe no tax on benefits.

– Joint filers with PI between $32,000 and $44,000 ($25,000 and $34,000 for single filers) are taxed on a sliding scale that tops out at 50% of benefits received.

– Joint filers with PI over $44,000 ($34,000 for single filers) are taxed on more than 50% and up to 85% of benefits.

Note that supplemental security income payments (SSI) are not taxable. For answers to questions about your benefits, contact us.

Clean Your Financial House for the New Year

Out with the old, in with the new. No matter whether you apply the expression to changes in attitude or to life adjustments, the end of the year is a great time to assess your household finances and prepare for new opportunities. Here are suggestions.

Review your credit report. Request a free copy of your credit report from each of the three major credit bureaus. If the reports contain errors, get them corrected.

Make or update your home inventory. Go through your house and make a video describing what you see, along with information such as purchase dates, prices, and estimated values. Your home inventory can be vital for getting insurance claims approved in case of disaster.

Calculate your net worth. Your net worth is the value of your assets, including your house, personal property, bank accounts, car, and investments, minus liabilities such as your mortgage, credit card balances, and loans. This is a great yardstick for measuring your household’s financial growth (or shrinkage) from year to year.

Increase your savings. If you get a year-end raise, consider contributing a portion of the extra money to your 401(k) plan or other savings account.

Purge financial records. If you’re a financial packrat with stacks of old cancelled checks and bank statements that are no longer needed for an IRS audit or your own use, shred them.

Need help? Contact our office.

Fight Scammers the Old-School Way

Scam artists are relentless in finding ways to take your money. But some old-school methods are still effective for protecting yourself. Here are suggestions.

Fortify your computer and your phone. Install anti-virus and anti-spyware programs and update your protection regularly. Consider firewall software to prevent unauthorized access. Change the password on your computer router from the default, enable and set up the router firewall, and keep your router software up-to-date.

Clean out your wallet. Make sure you’re not carrying personal identification numbers for debit or credit cards on a scrap of paper. If you do, anyone stealing your wallet will have open access to your checking account. Sign all your cards. Another old tip also bears repeating: Don’t carry your social security card with you.

Delete all spam emails immediately without opening them. Never click on an attachment or follow a link to a web page unless you know the sender. List your telephone number on the national “do not call” list. If a telephone solicitor calls, ask to be put on the company’s “do not call” list and then hang up.

Obtain a free copy of your credit report. Go to www.annualcreditreport.com and order a free copy of your credit report from at least one of the three major agencies. Review it for mistakes, accounts you don’t recognize, or unknown credit inquiries. If you find something wrong, report it immediately.

For more suggestions, please contact us.