‘Tis The Season!

‘Tis the season of magic with Santa and elves and flying reindeer. ‘Tis the season of wonderful smells with the freshly cut Christmas tree, the candles, and the holiday treats. ‘Tis the season of giving and receiving. What a delight! Not so delightfully, it is also the last month of the tax year – your last chance (kind of) to get some tax deductions tucked into 2017.

It is also the season of tax reform, tax proposals in both the House and the Senate, and a big push for Santa to put a shiny new tax package under the tree – talk about the magic of Christmas! Keep an eye out for actions between now and year-end. I can assure you that everyone and their dog will be writing about what, when, why, and how so stick to the reputable websites, understand the key provisions, and consider how it will impact your tax return.

There are a lot of things to think about with taxes and a lot is about the timing – do you want income or deductions in 2017 or 2018? It just depends on your tax situation at the moment.

  • If you had a big income year in 2017, you will likely want to find/create deductions in 2017. That probably means retirement plan contributions or charitable gifts. Those 2 items seem to be safe bets for staying in place regardless of tax reform.
  • If you had a llow-incomeyear but see brighter skies for 2018, you may want to shift those deductions into 2018. The beauty of retirement plan contributions (for the self-employed or for those who don’t have a work plan and instead make IRA contributions) is that you have until April 15th of the following year to deposit those contributions. For the self-employed, you may have until the due date of your extended tax return to make those. That gives you a lot more time for analysis and for saving.

First, perhaps a quick tour of the tax system would be helpful for those who don’t know much about the tax game that we are all playing. You may want to go to and pull up Form 1040 to view as we walk through the sections of the return – this will be fun!

Income – the US taxes your worldwide income on a cash basis. That means that if you earned income and received the cash in 2017, it is taxable in 2017. For those of you who own a business that uses the cash basis (you are a sole proprietor or LLC and file a Schedule C), you may have some control over the timing of cash receipts based on when you do your billing. Perhaps it makes sense to push income into 2018. Talk to your tax accountant or run a tax projection to see if that would be beneficial. (Note – simply putting the check into a drawer and holding it until January 1 is technically tax evasion so if you got it, deposit it, and include it in your income.)


  • One thing that is possible with respect to income reduction relates to capital gains and losses. If you have “capital” property, the most common of which is investments like stocks and bonds, you might have the opportunity to “tax loss harvest” if any of your investments have lost money.
    • You can take up to $3,000 in losses from Schedule D on your 1040. Losses above $3,000 are carried forward to next year. The markets have performed pretty well this year, but if you do have positions showing a loss (the market value is less than what you originally paid), you could sell those positions to take the loss.
    • As long as you don’t repurchase the same or “substantially the same” security within 30 days, you can take the loss. Note that transactions in tax favored accounts like IRAs and other retirement accounts don’t have a tax impact so you would have to look only to taxable accounts.
    • The losses would first offset any realized gains or capital gain distributions from mutual funds. A reduction of income is a reduction in income so talk to your financial advisor or tax professional to see if this might apply to you.
    • It doesn’t look like tax reform is going to impact investors much, but we obviously won’t know for sure until something becomes law.


Adjustments – these are subtractions from income. The more common items are:

  • Educator expenses – teachers of grades K through 12 can use up to $250 of paid expenses to reduce income. Planning to get some supplies for the classroom? Perhaps you want to do it in 2017, save your receipt and take up to $250 off your income. Hey, every little bit helps.
  • Health savings account – if you have a high deductible health insurance plan that qualifies for an HSA, you have until April 15th of 2018 to fully fund that account for 2017. Check all the rules but you want to do everything possible to fully fund the account. See IRS Publication 969 for all of the details.
  • IRA contribution – this is another one where you have until April 15, 2018 to make a contribution for 2017. There are income limits for the deductibility of your contribution, especially if you have a retirement plan through work, so do your research. is actually a really easy site to use and it is the ultimate source – search IRA and you will get all the information that you need.
  • Student loan interest – if you are paying on student loans, consider making your January payment in December so that you slide a bit more interest into 2017. This adjustment “phases out” at higher levels of income so check IRS Publication 970 for details. (This also applies to your home mortgage payment. That interest is a deduction on Schedule A but the same strategy applies: get more deductions into 2017.) Student loan interest is on the chopping block for tax reform so stay tuned. Mortgage interest is NOT. It is explicitly protected, at least today.
  • Others – there are some other adjustments so take a look at the Form 1040 under “Adjustments” and see if those apply to you. The big ones apply to the self-employed so if that’s you, make sure you maximize those items.


Deductions – these further reduce your taxable income. There are 2 ways these play:

  1. Standard deduction: you just claim it – no receipts, no fuss. The amount is based on your filing status (single, married filing jointly, etc.) The tax proposals look to dramatically increase the standard deduction. This goes into the “simplify” category.
  2. Itemized: you fill out Schedule A and keep receipts. The only “safe” items under the tax proposals are mortgage interest and charitable deductions. In terms of taking some actions this year to increase deductions here:
    1. Make your January mortgage payment in December.
    2. Make your charitable contributions by year-end. This includes both cash donations and your clothing and household goods donations. As you look at the latter, do make a list of every item you donate (12 men’s dress shirts, 4 men’s t-shirts, etc.), do use a value guide (Goodwill’s website has one) to value each item, do keep your actual receipt from the charity with the list and the calculated value, and do make sure to include it on your Schedule A if you itemize.
  1. If you give more than $500 of items to a single organization, you will have to fill out a separate tax form. If you have a high volume of items, consider splitting up your donations among several organizations to make this easier. Keep good records of exactly what you are giving to which charity.
    1. Pay your state income tax estimated payment in December. For the self-employed who make estimated tax payments, your 4th quarter estimate is due January 15th but if you pay it in December, it will go on the 2017 Schedule A. If you are in this situation, you should consider which year is best. However, under the tax proposals, the deduction for state income taxes is on the chopping block. Keep a close eye on the final package to see if this will be relevant or not.


Exemptions – these are fixed amounts that reduce your taxable income and are based on the number of dependents that you have. There is nothing to be done here but I do want to mention that these are on the chopping block under the tax proposals. (The tax rates are proposed to decrease and that in combination with other changes is not supposed to create higher taxes for most. We’ll see.)


Alternative minimum tax – this is a (hated) second way to calculate your tax to make sure that “high income” taxpayers pay their fair share. It may or may not apply to you (look at last year’s tax return), but it is definitely on the chopping block under tax reform, and everyone hopes it is finally, after decades of discussion, chopped! (Santa, all I want for Christmas is an end to AMT!)


Tax credits – these are dollar-for-dollar reductions in your tax. These are super valuable so check the list of items (page 2 of Form 1040) and make sure you claim any credits that you can. The most common are the child tax credit and the credit for child and dependent care. You either have kids or your don’t so nothing much to be done on these except to be aware of them and make sure you claim them if they are available to you. Two that could be relevant are:

  • Education credits (see publication 970 for details.) This is one where you may be able to pay tuition due for your child’s winter/spring semester in December if you have not already maxed out the amount of eligible tuition paid for you or your dependent. There are a lot of rules, income phase-outs, etc. with respect to these so take a look at the Publication. The IRS also has an Interactive Tax Assistant to help you determine if you are eligible. Tax reform could chop 2 of the 3 credits but the proposal keeps the more valuable one – The American Opportunity Credit – so stay tuned to see how it fares through the debate and compromise.
  • Residential energy credit – if you made (or make in December) certain home improvements that improve energy efficiency (wind, solar, geothermal heat pump) and qualify for the tax credit, you may get some help from Uncle Sam. Watch this closely as the House proposal and Senate proposal differ on these. Who knows what will happen in the final approved version.


So that is a not-so-quick overview of the tax items most likely to impact you. If you learned something new and are thinking, “rats, I could have done that on my 2016 return,” fear not! The IRS allows you to amend a prior year’s tax return for up to 3 years in order to correct errors or missed deductions. Talk to your tax return preparer (or get yourself one!) to see if this makes sense for your situation.


One last thought on taxes:  Taxes are confusing, contain a lot of rules, a lot of exceptions to the rules, and are just not fun. I get it. Unfortunately, we all have to play the tax game. It is really worth your time and energy to understand, at least at a high level, the rules of this game. It adds up to a lot of your money so it is worth it. Do a bit of research. Ask questions. Read the updates so you know what is happening. Look at last year’s tax return so you can see what may be changing for this year. If you are confused and unsure, the services of a qualified tax preparer could more than pay for the cost of the return so consider getting some help. May the magic of the season be with you whether or not Santa delivers a magical tax package.


The Tax Man Cometh

I like to pay taxes. With them, I buy civilization.”  ~ Oliver Wendell Holmes Jr.

I can’t say that I like to pay taxes, but I hope his conclusion is accurate! Perhaps taxes do buy civilization but regardless, they do buy our freedom. Freedom from jail for tax evasion, that is! I guess they buy our freedom in the greater sense as well since they pay for our military. That part I can get behind and perhaps feel less horrible about the large dollars that go out of my house every year in taxes.

But this is not about how you feel about paying taxes. It is your reminder that it is almost April and April brings the tax deadline. Here are a few reminders for you:

This year, you actually have until April 18th to file and pay your taxes because of Emancipation Day falling on Monday and the 15th falling on Saturday. However, don’t wait around for the 18th to get your taxes going.

The April deadline also marks the deadline for making IRA contributions as well as Health Savings Account contributions for those who had a high deductible/HSA health insurance plan in 2016. Extending your tax return does not extend the deadline for making these contributions; however.

If you do file an extension, remember that filing the extension only extends the time to file the return; it does not extend the time to pay so you must make an estimate of your tax liability and pay in 100% of it or be subject to interest and possibly penalties.

If you cannot pay taxes due, don’t ignore it! You can request installment payments of the taxes due. Discuss your options with your tax accountant so that you can take action rather than face additional penalties. The IRS loves to impose penalties so make sure you are on top of your options to minimize the money you will have to pay in.

Make sure you gather up all of your charitable contribution receipts and include everything –$10 here and $20 there adds up. For your noncash donations, keep a list of all of the items donated and use a site like: to come up with the value per item. You should keep this list with your tax records.

I am often asked by clients how long to keep tax records. The answer, like answers to most financial questions, is “it depends.” Here is how the IRS responds to that question:

(Although the reference says small business, it is the same for employees.) It is a good practice to clean out your records each year after you file this year’s return. Go through the old records and be sure that you don’t need the record for some other purpose besides taxes. And definitely, make sure you shred all documents when it is time to get rid of them! If you don’t have a shredder, many organizations host shredding events (frequently for charities) around tax time so search for locations where you can shred.

Taxes are never fun but round up those records and get it done. You’ll feel better once you have tackled the task. And maybe you can be like Oliver and enjoy the fact that you are supporting civilization.

To your financial (and tax!) success,


The count down is on…

I’m not talking about how many  days until New Year’s Day; I’m talking about how many tax days are left in the year. Wow, fun stuff!

Here are a few things to be thinking about as you round out the last tax month of the year:

  • Income items – is it better for you from a tax-standpoint to accelerate income into 2016 or delay it into 2017? For employees, you don’t have much choice, but for business owners, you may. Talk with your tax accountant to see what options you may have and what may be most beneficial.
  • IRA and HSA contributions – ok, you actually have a whole lot longer to think about these items as the code gives you until April 15th to round out the contributions but make sure you are planning to have the cash available to fully fund these important accounts. Even if you participate in a retirement plan, you can still make nondeductible IRA contributions. Make sure you are fully funding your retirement accounts first and then discuss with your tax accountant to determine if this would make sense for you.
  • Charitable gifts – This one does have a hard deadline of 12/31 so determine what giving you want to do and then plan accordingly. Ask your investment advisor if it makes sense to give appreciated stocks in lieu of cash. You can then replenish the gift with the cash, saving capital gains taxes and allowing the advisor to rebalance the account without selling securities that may be at a gain.
  • Charitable gifts of household items – Now is the time to clear out the closets, the drawers, and the cupboards of all the items that don’t fit, that you don’t like, and that you don’t use. The Goodwills, Must Ministries, Hope Houses, and many other organizations rely on your household goods to survive. Here’s a few tips:
    • Make a list of all the items; you can group them for convenience.
    • Price it based on the thrift store value. (Goodwill has one at
    • If the total value exceeds $500, you will need a lot more documentation for tax purposes so consider dividing up your donations for different charities.
      • Vietnam Veterans – I gave all my boys clothes and shoes to them.
      • Hope House (domestic violence shelters) – I gave my everyday women’s clothing to them.
      • Drake Closet (consignment shop which supports The Drake House – transitional living for homeless women and their children) – I gave my dressy, business clothes to them.
      • Goodwill or Must Ministries – I gave my household dishes, small appliances, etc. to them.
      • American Kidney – I gave any furniture to them as they pick up. (Nspire, Hope House and the Vietnam Vets pick up as well as many others.)
    • Keep all your receipts, the list of items and the pricing with your tax items.
    • Bask in the admiration that your tax accountant will have when you give him/her this information at tax time!
  • Review your 2015 tax return – Look at other items that impacted last year’s return and see what you have some control over for this year. If you need to make estimated tax payments, talk with your tax accountant to see if you should pay the state tax payment in December or January. Discuss any other items that you have questions about.

With tax-planning firmly in place, you are officially ready to bring in the New Year!

To your financial (and tax) success!

A New Attitude

In my last blog, I asked you to pay attention to your thoughts and especially your feelings as you interact with money and money matters. How you react emotionally has a huge impact on your ability to deal with money positively and create the type of calm, confident interaction with money and financial matters that I know you would like to have.

I recently had the pleasure of speaking to a group of sorority women at Georgia Tech. I always talk to students about their money story and how important it is for them to understand their money past so that they can create the kind of money future that they want to have. After the presentation, one of the women came up to me and said, “This is just what I needed to hear. I hate dealing with money and I guess I need to change that attitude!” Indeed!  When you hear someone say that, it is so clear that the energy being put out into the world is not likely to attract money and is not portraying a confident, empowered person! It is just so much harder to see that when the person doing the talking is you!

If you think about why she, or any of us, hates to deal with money, it’s probably because:

  • We don’t feel competent to make good decisions about our money, or
  • We don’t want to face up to our money situation, or
  • It brings up emotions that we just don’t want to feel (shame, fear, anxiety, conflict).

The cure for any of those things is action! Taking action is what moves us from incompetence to competence; it is what changes our money situation, and it is what can sweep away negative emotions by creating the positive association of action, progress, and growth. And action begins with a new attitude – “I just don’t know how” can become “I can’t wait to learn how!” “I’m broke” can become “I’ve got a plan to move to prosperity and debt freedom!” Fear, shame, anxiety and conflict can be converted to empowerment, pride, confidence, and serenity by learning from past mistakes, letting them go, and creating a plan to put in place new habits that move you toward financial peace of mind.

This week look at the ways that you may be “hating money,” avoiding financial topics, and swirling in emotion and see how you can take action to change your thoughts and create a new attitude toward your money. Pinpoint which of those areas applies to you and then get going on that attitude and dive into action.

Patti LaBelle rocked it when she sang:

I’m feelin’ good from my head to my shoes
Know where I’m goin’ and I know what to do
I tidied it up my point of view
I got a new attitude

Get your new money attitude, pick out your empowerment anthem, and start rocking your money story.

To your financial success!


It is Taxing to Be Self-Employed

Yes, in so many ways it is taxing and especially when you consider the self-employment tax. Just the name sounds wrong, “I am being taxed just because I am self-employed?” Kind of. Let’s take a look at this tax and understand exactly what it is.

When you are an employee, your employer withholds Social Security (FICA for us old-timers but officially OASDI – Old Age, Survivors, and Disability Income) from your paycheck at a rate of 6.2% of your taxable wages up to the limit. This is to pay for your social security benefit at retirement or your disability income benefit if you become disabled and have sufficient credits to qualify. This applies to income up to $118,500 in 2016 (no change from 2015.) That’s another reason to up your income above that $118,500 level!

They also withhold for Medicare at a rate of 1.45% on all income. There is no limit here and there can be a Medicare surtax on certain high income taxpayers.

If you have been an employee, you are used to seeing those amounts withheld as “payroll taxes.” Behind the scenes, your employer had to match those taxes and remit an equal amount as the employer contribution. When you are self-employed, guess who is the employer? You! You get the pleasure of paying the normal employee payroll taxes of 6.2% plus 1.45% AND the employer match of 6.2% and 1.45%. To make things confusing, the IRS just calls the total 15.3% self-employment tax.

When you complete the tax return, the software is programmed to consider the limit of $118,500 so it will apply the 15.3% to the first 118,500 and then just 2.9% to the amounts above that. If you have income of less than $400, you do not owe self-employment tax.

If you are self-employed, you will likely need to make estimated tax payments each quarter since there is no employer withholding these payroll tax amounts or the federal and state income tax amounts. You should make those payments by April 15th, June 15th, September 15th and January 15th to make sure you pay in most of your tax prior to the due date. If you underpay by more than $1,000, you may have to pay a penalty.

As you look at cash flow and consider how to increase income, don’t forget to plan for SE tax. However, as taxing as it can be to own your own business, the ability to create your own income stream, follow a passion, and build a business is like nothing else in the world!

To your financial (and business) success,


Let’s Get ‘er Done

Did you roll with me last week and get all of those income items organized for your tax return? Of course you did (but just in case, feel free to skootch back a week and take a look at it at how easy it is to get yourself organized way before April 15th.)

Let’s press on this week and pull together everything for the “deduction” side of this tax business. This is the good stuff so let’s dig up some receipts and bring down that taxable income!

Adjustments – these reduce gross income and are really important as a lot of “phase-outs” and other calculations are based on Adjusted Gross Income (AGI) so it’s helpful to have big numbers here.

  • Teachers – you still get a little tax benefit for buying supplies for your classroom. Gather those receipts.
  • Health saving account – if you had a high deductible health insurance plan and made contributions to this type of account, make note of what you contributed.
    • Also, if you took any withdrawals here, make sure you have the receipts to keep with your tax return.
  • Moving expenses – these are for job-related moves so if you moved, check with your tax preparer.
  • Deductible part of selfemployment tax – the software will take care of this one for you.
  • SEP, Simple or other qualified retirement plans for selfemployed – if you are self-employed, it may not be too late to set up a retirement plan for your business and make a contribution for the 2015 tax year. Check with your accountant to see if it will work for you.
  • IRA – if you made an IRA contribution be sure to let your tax preparer know. There are some income and other parameters in order for it to be deductible but making a contribution is still a good thing regardless. And it’s not too late on this one either. You have until April 15th to get some money in there.
  • Student loan interest – be sure to gather up any 1098-E for student loans. There are limitations here but be sure your tax accountant has the details.

Deductions – “Schedule A” – I’m sure most people who own a home are familiar with most of these so they should be easy. Gather up all receipts that relate to:

  • Taxes – income taxes paid, real estate taxes and personal property taxes – remember, if you bought a new car in 2015, you paid your ad valorum tax upfront so may have a big number here.
    • For older cars, you may still be paying ad valorum tax with your car tags.
  • Interest on your mortgage – you know this one; just grab the 1098 from the mortgage company.
  • Gifts to charity –
    • You will need the who, what, when and where (charities address) so gather up all of those details. You also need “how much” as in what is the value of the item you donated so make a good list of those non-cash charitable donations. You can price them by looking at the Valuation Guide created by Goodwill:
    • For cash gifts, a cancelled check isn’t good enough so be sure you got a receipt from the organization.
  • Casualty and theft losses – if life handed you lemons this year, keep track of your losses and see if Uncle Sam will give you a little lemonade.
  • Job expenses, tax return prep, and investment management fees – yes, these are subject to the 2% threshold to be deductible but gather it all up. It never hurts to add it up.

Credits – maybe yes, maybe no on some of these. Be sure to round up any college-related paperwork. You will get a 1098-T for college tuition but be sure to gather up the cost of books as well. Did you make your house more energy efficient this year? You may qualify for the residential energy credit.

See, that wasn’t so bad.  Nothing feels as good as getting all of that tax return paperwork handed off to someone else! If you do your own, make a plan to open up that tax software and spend just 10 minutes typing in information. Set the timer on your phone – just 10 minutes. Peck away at jobs that you don’t enjoy, and it will be done in a painless way. No one wants to think about spending hours on a Saturday droning away on taxes so spend a bit of time doing one section and be done for the day! Do a bit more tomorrow. You will be glad that you are not spending an April day working on taxes. Get ‘er done, ladies, get ‘er done!

To your financial (and tax) success!

Let’s Get Organized!

January has come and gone which means a) the year is racing by, b) most people have already bagged their new year’s resolutions, c) you have gotten a bunch of tax forms in the mail, or d) all of the above?

If you picked “d,” you are a winner! The year is racing by, everybody, except you, has bagged those resolutions, and you do now have a stack of tax forms, or will soon because the mail date is upon us. So, in honor of all those busy beavers who worked so hard to prepare those tax forms, let’s have a quick run-through of what they are, what they mean, and how you can get them all organized now and avoid the April rush.

To help you and your tax accountant prepare that tax return with ease, grab a couple of large envelopes and let’s sort through those forms and add a few other things that you will need.

Label one envelope “Income Items.” In that envelope will go:

  • W-2’s – the form that you received from your employer if you worked as an employee. Take a quick peek and make sure the income number matches what your total salary and bonus is. Does any 401k contribution show up correctly? Do you have questions about any of the information that is shown? If you do or if anything seems amiss, now is the time to contact HR so that you can straighten out any errors.
  • 1099’s – There are a whole slew of potential 1099s that you can get. The most common are 1099-INT or DIV which come from your investment and bank accounts. There is usually also a section with the 1099-B if you sold any securities during the year. 1099-R means that you took money out of an IRA or other retirement account. 1099-G is the form that you will get if you got a state income tax refund in the prior year. 1099-MISC means that you performed contract work for someone and will likely need to include a schedule C for nonemployee income. Be sure to include all 1099s in your income envelope as there are quite a few other varieties – all of which are important.
  • K-1 – these forms come from being a partner. This will show your share of the income, deductions and credits. Be sure to take a good look and make sure that the ownership percentage and other details appear accurate. If you have questions about the information that appears, be sure to contact the managing partner to get details or clarification.
  • Include any other forms or details of income that you received during the year.

If you have your own business, you will want to include a complete financial statement from the business. Label a second envelope “Business” and include all of the details from your business.

  • If you use your car for business, make sure you have a mileage or other log to show the business miles driven, including who you met with (or the activity performed), dates and the mileage to and from. If you didn’t have a great log last year, now is the time to set one up for 2016!

I’m sure you got other forms in the mail that relate to potential deductible expenses as well. Be sure to label another envelope “Deductions” and include all of those things. I’ll go into more details on those items another time, but, for now, set aside a few minutes and get all of the income pieces of your tax return organized. It doesn’t have to be an overwhelming task if you take it piece by piece and knock it out a bit at a time.

We know how fast the year is speeding along, and April will be upon us in the blink of an eye so avoid the stress and get yourself organized now. You’ll be glad that you did.

To our financial (and tax) success!