Tips

It’s no wonder that the word “bankruptcy” sends shivers down the backs of debtors who have hit hard financial times. Despite the system’s intent that bankruptcy works as a mechanism for giving the debtor a chance for a fresh start, the ramifications of declaring bankruptcy are far reaching and drastic, to say the least.

Debtors facing foreclosure or excessive debts are too often under the misconception that declaring bankruptcy is the perfect solution to these problems.

There are good reasons to look at the alternatives: bankruptcy stays put on your credit record for quite a long time, and it makes advancing in life incredibly difficult. In addition, as noted by Investopedia, the updated bankruptcy law, passed in 2005, includes severe restrictions that make it more complicated to file for bankruptcy.

In a recent article by Carrie Smith of The Simple Dollar, Smith notes that Chapter 7 and Chapter 13 are the two main types of bankruptcy available for most debtors:

Chapter 7 is often referred to as “liquidation” bankruptcy because it will discharge most of your unsecured debt, including personal loans and credit cards. You’ll be required to pass a “means test,” have a certain amount of income, and may be forced to sell any non-exempt assets. For the most part, however, Chapter 7 filers are able to keep most of their assets. The entire process for this lasts about three or four months.

Chapter 13, however, works differently and is known as the “reorganization” bankruptcy. As Smith notes:

This option will set you up on a repayment plan and force you to pay back your creditors over time. No property is required to be liquidated in the process, but it may take three to five years to finalize everything. To become eligible for this type of bankruptcy, you need to have regular income to make the required monthly payments.

Another option, Chapter 11, has a repayment plan involved that is similar to Chapter 13, except it only applies to specific creditors, not everyone. It doesn’t completely reset your debt, in other words, and allow you to begin fresh as Chapter 7 or as Chapter 13 sometimes does.

Chapter 12, one more option, is only available to farmers and fishermen.

Money Management offers these observations about the different kinds:

While bankruptcy does serve to help you obtain a fresh start with your debts, there are some ramifications to filing for bankruptcy. For example, Chapter 7 bankruptcy remains on your credit report for ten years, although that does not necessarily mean you won’t be approved for any credit before then.

As Smith from The Simple Dollar notes, bankruptcy is not necessarily the cure-all for your financial challenges. In addition, not every debt you have will necessarily be eligible for discharge. For example, bankruptcy will not help you deal with owed back taxes or child support. And before even considering bankruptcy, it is wiser to exhaust every other possible option you have to resolve your debt problems.

Conclusion: Don’t Rush Into the Process, If You Can Help It

There are good reasons to not rush into the decision to declare bankruptcy:

• The odds may work out against you with bad credit in your name
• Filing for bankruptcy has become complex as well as costly owing to the 2005 bankruptcy laws.

For this reason, always consult with a trustworthy bankruptcy attorney before filing becomes necessary. Ultimately, making the right move in the right situation can provide you with a needed respite from anxiety and debt.

Brexit is an abbreviation for the term “British exit.” On June 23, 2016, a referendum was passed by voters in the United Kingdom approving the exit of the United Kingdom from the European Union. This disassociation from the European Union (“EU”) was met with a great deal of excitement from around the world, in addition to uncertainties concerning the impact on financial markets as a consequence from “the exit.” Market reactions toward the event were in some cases severe.

The jury is still out with respect to which type of taxpayers and investors will be most affected from the exit. According to the American Institute of Certified Accountants (AICPA), most investors will experience some repercussions from Brexit, even if they only experience fluctuations in their investment portfolios as markets react to change and uncertainty. Clients who regularly conduct business with the UK will likely feel the most impact from Brexit. These would include clients who have UK-based sales or who purchase goods or services from UK-based enterprises.  

The AICPA goes on to say that there are many unanswered questions about the tax implications from Brexit. Customs and excise duty impacts, value-added tax issues, and the tax consequences of repatriating profits to or from the U.K. are some possible implications.

However, there are some ramifications that are expected from the “yes vote” to leave the EU. Some of the reasons that Americans should care about the Brexit vote are as follows:

The Stock Market Will Get Shakier

As noted by Time:

“Brexit has the potential to be a big deal because it’s a source of volatility,” says Mark Freeman, chief investment officer at Westwood Holdings Group.  Burt White, chief investment officer at LPL Financial offered his forecast that If Brits actually vote to leave the EU, “expect a decline across almost all global equity markets, simply on the economic uncertainty created,”

In reality, what happened after the vote was that stocks around the world plunged on the news because of uncertainty over what would come next and because of the prospect of an economic slowdown in the UK. The result could reduce the value of Americans' 401(k) investments and individual retirement accounts. Volatile gyrations in markets worldwide could continue. "Uncertainty is the enemy of investment," said analyst Alastair George.

The Weakening of America's Largest Trading Partner

As noted by USA Today: The EU is the most lucrative market for American goods, as it is the largest trading partner with the United States. An exit by Great Britain signals a diminishment of the 28-nation bloc, undermining that economic bulwark. A matrix of trade agreements between the EU and the U.S. would be complicated and negotiated adjustments would be necessary.

It May Leave a Less Stable Europe

Brexit could start a long line of dominoes to fall across Europe. Before Brexit, multiple countries had been pondering the possibility, from Italy to France. CNN notes the following: “Greece has been considering leaving the EU for a couple of years now. Now they may start thinking out loud. Far-right politicians in the Netherlands and France looked at what happened in Britain and said, hey, we want get-out-of-the EU referendums in our countries too. If enough dominoes fall, there's a real danger the EU could collapse.”

Your Retirement

Many Americans are invested in the stock market through their retirement plans. In fact, about half of America’s full-time workers participate in their company’s 401(k), according to the Pew Charitable Trusts. Those investments leave them exposed to financial market turmoil surrounding Brexit, as the Washington Post has noted. As remote and unrelated to your retirement as an event in Britain might seem, the two are more closely connected than you might realize, and the Brexit situation warrants vigilance from investors.

Your Mortgage

A recent Time article made this observation about the Brexit’s influence on mortgages:

Mortgage rates tend to be closely tied to the Treasury market. As the market rates go so do mortgage rates tend to go. Recently, the U.S. Treasury market has experienced a decline explaining the drop in mortgage rates. “The risks surrounding Brexit have clearly had an impact on the U.S. Treasury market,” says Brian Belski, chief investment strategist for BMO Capital Markets.

As Time notes, low rates are usually good for the economy. It means lower borrowing costs for businesses and lower mortgage rates for potential home buyers. However, low rates can also signal underlying trouble in the economy. If the economic recovery were going well, borrowing rates would rise as demand for money grows and others, such as investors and business owners, pursue greater risks.

Did you know you can get tax info from the IRS on social media?

When you’re on social media, probably, the last entity you’d ever want to get updates from is the IRS. But these channels can be a really great way to get a question answered. It’s important to note though, the IRS does not answer individual tax questions through social media and they only post public information. And if you love to get instant notification on tax changes like we do, you can do that too. Don’t worry if not, we’ll “follow” the IRS and let you know when you need to know about tax updates. You can always call us with any question you have that’s unique to your tax situation.

Here’s how to find the IRS on popular social media channels:

• Twitter.  For news and updates: @IRSnews and @IRSenEspanol. The Taxpayer Advocate Service, an organization independent from the IRS that recommends improvements to the IRS based on issues taxpayers face @YourVoiceAtIRS.

• Mobile App.  IRS2Go Check your refund status and get tax updates—it’s free and available on Apple iOS and Android devices.

• YouTube.  IRS YouTube Channels Short videos on a wide range of tax topics. The videos are accessible in English and Spanish as well as American Sign Language.

• Tumblr.  The IRS Tumblr blog posts the recent tax news.

• Facebook.  The IRS Return Preparer Facebook page is mostly for us tax professionals. However, you can also view the IRS pages for updates and tax assistance from the Taxpayer Advocate Service at facebook.com/YourVoiceAtIRS.

• Podcasts.  Short IRS podcasts episodes are available with helpful tips on a broad range of tax matters. You can also access the audio files on the Multimedia Center page on IRS.gov.

To file separately or to file jointly, that is the question.

If you were married this past wedding season, congrats! And now is a good time to think about how you’ll file your taxes in 2015.

As a legally married couple, you now have 2 filing options:

1. Married Filing Jointly
2. Married Filing Separated

Married Filing Jointly
Basically, this is what it sounds like, you and your spouse agree to combine your income and deductions and file as one. How romantic, right? Filing jointly may help reduce your taxes by raising your standard deduction and being eligible for benefits that filing separately is not eligible for. Also, filing together means you share the responsibility for the return, both being responsible for audits and penalties.

Married Filing Separately
The main advantage here is if you want to keep the responsibility separate. For some couples’ situation, this is a better option for them.

We’re here to help you decide what the best filing status is for you. Give us a call today!

Take the vacation you really want to go on. Start planning now for next year’s and you’ll be so happy you did.

Vacations are not clearly priced. Even if you buy some packaged deal, there’s always some cost that’s not accounted for. Here’s some tips on how to plan for next years vacation.

1. Dream Big and Set a Goal
If you start planning for next year’s vacation now, you can more than likely afford to dream big. Where’s somewhere you really want to go that would be way high up on your bucket list? Once you’ve decided on that, you can start to assess the costs and start saving appropriately. Plus, some amazing places book out a year in advance so starting now may mean you’ll get “the good spot.”

2. Research
Start thinking about where you want to go and how much it will costs. See what kind of deals you can find. Go offseason if you can. See if booking flights and hotels and cabins now saves you some money. If not, it will at least save your place. Contact travel agencies and online resources as well to see what’s out there. Also know that there are other places to stay than hotels that are cheaper and potentially more adventurous. A lot of state parks have charming cabins with lights, electricity and heat. Amenities almost as good as a hotel with way more adventure and half the price.

3. Account for The “Hidden” Costs
There’s so much to account for than airfare, hotel room rates and food. If you’re planning well, make sure you think through all the costs like museum admissions, state park fees, hotel service tips, toll booths, parking, baggage fees (for everyone, they add up), taxes (hotels in some cities can have several taxes that increase costs and accumulate over several lights), and you’ll want to calculate how many meals you’ll eat and how many of them will be going out. You’ll also want to plan for souvenirs and tchotchkes that you come across. Yes, you can plan for impulse purchases.

Getting paid next year for this year’s could be a great benefit to you!

If you’re self-employed and pay your taxes in full up front, consider holding off on sending out invoices until close to the year’s end. And if your clients pay your invoice thirty to sixty days out, there’s a good chance you won’t receive payment until 2015. If that’s true, you can lower taxes by lowering your tax bracket.

You can also postpone income by making purchases that you can deduct in 2014 that you have been planning on making in 2015. This will lower your taxable income and save you money on taxes you could owe.

Other than just saving money on taxes, additional good reasons you’d want to defer income may be things like making sure you hit certain thresholds for credits like child tax credits, education tax credits, and so on.

Of course you can’t do this every year because it will catch up with you as you would be just postponing paying but it can be a great strategy situationally when you’re transitioning between tax brackets.

We’re always here to offer advice on when it is right for you to defer income. Everyone has a unique situation and it’s always best to get advice from a professional that understands where you are financially.

When it comes to making a budget, good intentions only go so far. Find out how to keep your budget realistic.

If you’re a local artist or craftsman that’s turned your passion into a business, you’re quickly finding out the reality and needs of budgeting. Here are 3 common errors you’ll want to avoid:

1. Not Thinking of Upcoming Costs
With all you have on your plate today, it’s hard to even think about tomorrow let alone what’s coming up in the next 6 months. But planning for those things today will give you so much more peace in the coming months. Think about demand for your product or services in the next 6 months to a year. What’s a slow time you have coming up? What’s a peak time and how do you budget that out to cover the slower time. For example, if you’re a wedding photographer, you can’t plan on being busy in the winter so, how do you make income from the wedding season cover the offseason?

2. Not Having a Specific Goal
Hoping to make more this month than last month is not a goal. How much more you want to make is a goal though. When you exhaustively write down all your costs and have a cushion for unexpected costs paired with specific goals to increase revenue, you’ll get much closer to achieving them than you would without.

3. Setting It and Forgetting It
Managing a budget is an active ongoing exercise that evolves overtime. Setting up a spreadsheet and walking away is useless. You have to be able to adjust and improve the budget in the moment on a regular basis. Set aside a time every month to do this and you’ll see your money grow.

Remember to always consult with a professional financial advisor. You do your thing you’re good at doing and we do ours. Let’s partner together today!

Don’t wait until the last minute to itemize your deductions!

Starting to itemize now will greatly help you avoid stress when it gets to be tax season again. Here are some things to keep in mind to be prepared.

Talk with a tax professional about your situation as soon as possible. You’ll want to assess whether itemizing is right for you or not. Your income might be below the threshold of making it worth your while to itemize. And if it is below the threshold, we could help you by showing you ways to match the benefits you’d see from itemizing. For example, it may mean doubling up on a couple of mortgage payments or paying property taxes early that could change your taxable income. We’ll help you decide what’s best for you.

If you are planning to itemize, you’ve got to organize. Have a dedicated place in your house that is solely for tax records such as receipts or your log for business mileage. If you have a smartphone, it’s a best practice to take a photo of each receipt and record so you have a digital backup as well as a place to maintain receipts that you were sent via email. There are even apps like Genius Scan that turn your iPhone photos of receipts into PDFs.

Start now if you haven’t already. Your future self will thank you!

Determining what’s a business travel expense and what’s not can be a very gray area. Find out how to clear up the confusion.

Essentially, to be considered a business travel expense, the main question to ask yourself is, “Did this expense go towards moving my business forward?” If you can answer that question with a “yes,” here’s what you need to know about what you can deduct on your taxes.

You can deduct business expenses related to travel, such as, transportation, meals, lodging and entertainment.

Common Transportation Deductions

• Airline Tickets
• Rental Cars
• Taxis
• Trains
• Personal Car Mileage ($0.56 per mile as of 2014)
• Tips to Drivers
• Parking

Common Meals Deductions (Deductions for meals is limited to 50 percent of the costs)

• Breakfast
• Lunch
• Dinner
• Snacks (at the airport, for example)

Common Lodging Deductions

• Room Rate + Applicable Taxes
• Tips (to valets, for example)
• Parking
• Wifi charges necessary to doing business
• Laundry/Dry Cleaning

Common Entertainment Deductions (This one is more gray and more scrutinized by the IRS. Be sure you can prove the entertainment expense was directly related to the betterment of your business. Also only 50% of the amount is usually deductible.)

• Golf
• Cocktails
• Convention Receptions
• Nightclub Admission
• Sports Arena Parking

We’re here to help you deduct all the expenses you’re entitled to. Give us a call today!

Roth IRAs can be mystifying with all the conflicting information out there.

Investments in Roth IRAs are quite simple to understand despite what financial ads that run during major sporting events would lead you to believe.

Roth IRAs are for people who have an income of up to $112,000 per year or married couples who earn up to $178,000. What’s great about a Roth IRA is that you do not have to pay taxes on it. No matter how much your investments accumulate, Uncle Sam doesn’t see a nickel of it.

There are several ways you can invest in a Roth IRA. You can set up a Roth IRA as a mutual fund, buy bonds or even invest in real estate. However, as of 2014, you can only invest up to $5,500 per year—$6,500 if you’re over 50 years old. It’s also important to note that you have to earn an income to be able to contribute.

To make investing easier, set up automatic investments to be deducted from your account. This will help you not forget as well as take away any temptation to skip a payment here or there.