Personal Finance and Tax Tips

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2022 some things to think About as you get ready for the upcoming tax filing season

By Kristin P Sinclair – A Accu Tax @Sinclair Financial Solutions  – July 2, 2022

If you are single your taxable income begins at $12,950.00+

If you are single and age 65 taxable income begin at $14,700.00+

If you are the Head of the Household your taxable income begins at $19,400.00+

If you are the Head of the Household and age 65 your taxable income begins at $21,150.00+

If you are married filing jointly your taxable income begins at $25,900.00+

If you are married filing jointly and one of you is age 65 your taxable income begins at $27,300.00+

If you are married filing jointly and both of you are age 65 your taxable income begins at $28,700.00+

If you are married filing separately your taxable income begins at $5.00+ at any age.

If you are a qualifying widow with dependents your taxable income begins at $25,900.00+

If you are a qualifying widow with dependents and age 65 your taxable income begins at $27,300.00+

If you are legally blind and have signed documentation from your eye doctors office to support this your status your standard deduction increases by $1,400.00 if you are MFJ, QW, MFS each.

If you are legally blind and have signed documentation from your eye doctors office to support this your status your standard deduction increased by $1,750.00 if you are Single or HOH each.

Capital Gains are taxed differently than other types of income.

If you are MFJ or QW Maximum rate of tax on qualified dividends or qualified capital gain is $0.00 if income is less than $83,500.00

If you are MFS or QW Maximum rate of tax on qualified dividends or qualified capital gain is 15% if your income is less than $517,200.00

If you are Single the rate of tax on qualified dividends or qualified capital gain is $0.00 if income is less than $41,675.00.

If you are Single the rate of tax on qualified dividends or qualified capital gain is 15% if income is less than $459,750.00.

If you are HOH the rate of tax on qualified dividends or qualified capital gain is $0.00 if income is less than $55,800.00.

If you are HOH the rate of tax on qualified dividends or qualified capital gain is 15% if income is less than $488,500.00.

If you are MFS the rate of tax on qualified dividends or qualified capital gain is $0.00 if income is less than $41,675.00

If you are MFS the rate of tax on qualified dividends or qualified capital gain is 15% if income is less than $258,600.00.

Income above those thresholds will be taxed at 20% unless the 25% or 28% rates apply to your particular situation.

Let’s look at some various examples that could be happening to some folks.

Zelda is retired over 65, and was one of the folks who fortunately survived her Covid-19 experience, and  who suffered from Long Haul Covid and still wants to live in her home.  She is not interested at this point to moving into any type of care center living arrangement.

Zelda is determined to recover as much as possible. However, Zelda has to make home modifications so that she can remain at home.

Zelda is a single lady who loves the home she owns, loves her neighbors, and wants to stay in her home as long as possible. Zelda lives in a state that does not give her a lot of tax breaks so Zelda will still have ample state taxes due. Zelda has social security income of 19K in 2021, a pension of 19K in 2021, Zelda has an IRA distribution of 19K and Zelda sells 60K of capital gain held long term and her cost basis in her capital gains is 45K and Zelda sells 5k of capital gains which she has held short term and has a cost basis of 1k, Zelda has dividend income of 10K which is qualified and 2k of dividend income which is not qualified.

Zelda does renovations to her home which are medically necessary so that she can continue to reside in her home and none of the renovations are such that she is increasing the value of her home and she spends funds to make her home livable for her medical needs and pays for private nursing help for 4 hours each day for 6 months in 2022. She spends 50K on the modifications and the nursing help, and also of course pays her Medicare premiums and her Medicare supplement premiums, and her pdp and her applicable oop drug costs. And her other doctor bills and hospital cost sharing based upon the medicare supplement. Dental and vision, Zelda spends 65K in qualified medical bills in 2022. Zelda also takes funds out of her savings to pay all the expenses needs to run her home for the 12 month period and cover her meals and home and auto insurances.  Zelda will need to plan for next year more cautiously since the private care is still needed in 2023 but all the home modifications have been addressed for the upcoming year. 

Nelda is Zelda’s twin sister and lives in a county on the other side of the state line, and also has the same income, but Nelda had previously modified her home when she suffered a medical set back several years ago. In 2022 Nelda pays 15K in  additional medical bills which are considered deductible medical expenses.

These two ladies will have very different tax situations when they have Kristin prepare their taxes. Fortunately for Nelda She had made extra payments federally made in the form of estimated payments. So Nelda is feeling confident that 2022 will be okay. She too still needs limited private nursing help and will need to plan for that expense for 2023 and knows that she will be making estimated payment for 2023 as well.

In Nelda’s case her home state offers significant tax breaks since she

A. is over 65 and

B. has long term capital gains taxed at the state level with additional tax breaks.

So Nelda does not have the same federal tax situation as her sister, and does not have the same state tax situation as her sister in 2022.

Everyone that has income above their standard deduction, is going to have to address their own tax obligations, based upon their own unique situation each year.

These two sisters talk daily and enjoy a lunch together via video chat also almost every day. The pandemic encouraged the ladies to learn how to use their computers and phones to improve the quality of life while so much isolation was having to be observed. Have fun they do, and soon they will both be able to spend some more face to face time together and laugh and talk while they are sitting across the table from each other. Sometimes in Zelda’s home and sometimes in Nelda’s home.  The ladies are going to make the most of what life offers.

July 2, 2022 – Kristin P Sinclair –  A Accu Tax

@Sinclair Financial Solutions  | PO Box 4978

Rock Hill, SC 29732   | 803-329-0615 voice  |  803-327-4352 fax

Kristin@RHSC.com

Tax Changes 2022 and Beyond

by Kristin P. Sinclair, A Accu Tax   June 26, 2022

In 2022 the standard deduction increased for most taxpayers. This is welcome news because inflation has certainly impacted the daily lives of most Americans.  In 2022 the standard deduction for a married couple filing jointly will be $25,900.00.  The standard deduction for a single person will be $12,950.00.  The standard deduction for a head of household taxpayer will be $19,400.00.  Please note that once a taxpayer reaches age 65, then will be $1,700 for a single person, $2,700 for a couple filing jointly, and additional deduction benefits for the blind.  

Let’s think about a young hard working couple with employer income, group health insurance premiums paid with pre-tax dollars.  Both also: contribute to a 401(k) at work, an HSA funded with pre-tax dollars, $50,000 term life insurance policy, a dental/vision/hearing policy, and a long-term disability policy.

This couple combined earns $120,000 per year prior to any pretax deductions.  Their combined W-2 statements report federally taxable income at $80,000.  Their 2022 standard deduction as a couple Married Filing Jointly should be $25,900. This couple will have net federal taxable income of $54,100.  Much of their income will fall into the 12% tax bracket, while a portion of their income falls into the 10% tax bracket.  By  using the employer pre-tax benefits from work they were able to reduce current federal taxable income.  These tax savings enable the couple to set aside for funds in their 401(k) acounts for their retirement days.

They of course are contributing to Social Security Trust Fund taxes and Medicare Medicaid funds taxes.  They also know that once they begin to receive Social Security and Medicare, they have already done a lot to make their retirement years more comfortable.  They talked with their tax advisor Kristin to find out what they could do to most benefit from plans offered to them and build their future together.  Maybe you should phone Kristin today at (803)329-0615 and talk about tax saving strategies !

Kristin P. Sinclair

Rock Hill SC and Charlotte NC

June 26, 2022

KPS: More information is available at IRS.gov.

See Publication 590-A and Publication 590-B.  

Capital Gains and Losses: A bit more to think about.

by Kristin P. Sinclair  – A Accu Tax  – June 19, 2022

William and his bride Sherry have been married for 47 years, are getting ready to retire and they plan to say goodbye to much of what they have had in the family home for decades they are opening up space in the home so that it is less crowded and they are also getting rid of much of what is in that 3 stall garage that they have decided they do not need anymore.  

They have an antique car that has been a lot of fun, they have enjoyed going to various antique car shows.  They have enjoyed the wonderful conversations that the antique car has been the topic of conversation.  William has kept excellent records of the purchase of the vehicle and each dollar that went into making that treasure of joy what it is today.

William has never deducted any of those neither initial purchase nor improvement expenses, that were incurred over the years, that car was a fun hobby, and many friendships were made with other hobby enthusiasts.  But now it is time to sell that car and it is time to make some money.

William and Sherry plan to travel much of next 2 years and that car is their ticket to travel and cover hotel expenses etc.  But they will have a capital gain to claim when that antique car is sold.

William is very glad that He kept such good records over the years on what has gone into that car.

Their cost basis ended up being quite significant so when they pay the estimated taxes on their capital gain it will not be based upon the amount they sold the antique car, it will be the based upon the difference between their cost basis and the sale price.  They will be making every penny back that they put into the antique car over all those years and, also quite a bit extra, so making the estimated tax payment will bring another smile to the faces.

And since they have the records to support their position, on the cost basis of the vehicle and the date of acquisition as well as the improvements made over the years, when the sale goes through, they know exactly where that sale document will be filed to have all the documents together. In the event those documents are needed again.

Additionally, they also know that all the documentation will also be on file with their tax return as well.

William and Sherry also are selling their 5-year-old vehicle, but with that separate transaction they are not going to be making a capital gain, nor are they going to have a capital loss.  They are simply selling a well-used commuting vehicle that served the family well for 5 years. And no profit is being made with this separate transaction.

by Kristin P. Sinclair: A Accu Tax

Rock Hill, SC

June 19, 2022

 

 

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Social Security Income and Planning

by Kristin P. Sinclair      May 14, 2022

In order to fully fund your own social security income,  ideally you will be able to work and receive reportable earnings for 35 years. Earned income wages work and pay into the system as a beneficiary.

Retirement could potential last longer than you think it might. If you are fortunate to reach the age of 65 typically you and others your age of 65 will live another 20 year to age 85.  And one in every three will live to age 90, then also consider one in seven will live to 95 or beyond.

For more information on life expectancy, go to the website
www.ssa.gov/planners/lifeexpectency.htm

If you are planning on working and also receiving social security benefits, a web site to review is
www.ssa.gov/benefits/retirement/planner/whileworking

When you want to calculate your potential benefits and have not yet applied for benefits. A good resource online is
www.ssa/gov/estimator

Everyone is unique and our situations are unique. That is a great reason to do some research that applies to your situation. www.ssa.gov/fags has many commonly asked questions and answers to those questions. That might help you consider some additional things that you want to include in your own personal research.

And when you are ready to apply for your benefits
www.ssa.gov/benefits/retirement/applyforbenefits

is where you can complete your application on line. You can do this up to 4 months in advance before you actually want your retirement benefits to begin. If you do not want to apply on line for any reason you can call 1-800-772-1213 for most folks and if you are a tty users 1-800-325-0778.

Monday through Friday from 7a.m. to 7p.m. to apply by phone. And then for those who wish to actually apply in person at one of the local Social Security offices. Call in advance to schedule your appointment. No one wants to wait in a long line indoors at this point in time, especially if you can avoid that and are able to plan ahead.

If you want to do a bit more research the government has information available to you.  See how Social security works, who is eligible, and what the process is to apply. What to consider before you actually do apply. www.ssa.gov/benefits/retirement

A free and secure way to look at your personal earnings and use interactive tools you can use the online toll available at www.ssa.gov/myaccount if you have a concern that you have earnings that have not been reported contact your employers and contact the Social Security to see if you can facilitate efforts to set the record straight you might have the documentation needed to help your position on your earnings.

Not certain where to begin on your device, start by taking a look at: www.ssa.gov

Kristin P Sinclair A Accu Tax
Rock Hill, SC
May 14, 2022
803-329-0615

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Some more planning strategies while you are working and building your future

by Kristin P. Sinclair  –  A Accu Tax  –  May 7, 2022

Many folks have employers who help match the employee 401K contributions up to the amount the employer has pre-established as the employer match. For the dollars you move into your 401K today you lower your taxable income today.  If instead your choice is a Roth 401K you are taxed today but years from now, no tax liabilty is applicable so long as you have held your funds in the Roth qualified plan for the required period of time.

You are building your future security for the time you are no longer working.

That period of time could be a longer period that you had previously imaged it would be.

Most working folks realize that their families could need additional funds in the event that the primary wage earner were to pass away, that is when the family is truly grateful for the Life Insurance plan that was already in place.

A term life insurance plan is going to offer lower premiums for the young wage earner and offer protection for the present. That lower premium should help the wage earner plan for the long term future by contributing to the 401K plan or their SEP IRA or their IRA or their Roth IRA while they are earning income.

The wage earner is building a future and protecting their loved ones for the immediate needs by using such a planning approach. Life insurance provides for the immediate lump sum amount of money in the event of the insured death. While you are young and healthy those premiums are low, allowing you to save in a separate savings vehicle. Providing income replacement for the beneficiaries and peace of mind today while planning for the long term by saving separately.

Since very few folks working will have their nest egg already set aside when they are young, some planning and self restraint on current spending can make saving for access to funds later possible.  

Kristin P Sinclair A Accu Tax

Rock Hill, SC

May 7, 2022

803-329-0615

 

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Charitable giving for your 2021 tax year

by Kristin P. Sinclair – A Accu Tax – May 6, 2021

For Tax Year 2021 Gifts to Charity has a whole new potential that so many more folks can benefit from when they complete their tax return. Even when you do not itemize, it is possible to get some tax advantages from giving to certain charities.  When you do itemize that to is possible.

You gift one of your favorite charities let’s say you have special place in your heart for the great work being done by,  Feeding America and the gift of cash in the form of the check you send along with your written statement.  Your check is for $150.00. You want to have a record. And of course when you are sent your thank you letter acknowledging the gift you keep that acknowledgment letter for your tax files. Write your check number on the acknowledgment as well.

You also have some other favorite charities and You have decided to donate to your Nature Conservancy charity, and in turn for your donation they are going to send you a reusable bag that you intend to take on your grocery shopping trips along with you other reusable bags. You send your cash gift in the form of a check to Nature Conservancy in the amount of $100.00 and they send you the reusable bag that you get to display each time you use that bag. If you simply keep the bag in a safe place that too is okay.  That non profit logo design bag; that they have valued at $10.00 along with your thank you acknowledgment is still your gift to say thank you for being generous.

$100.00 less $10.00 = $90.00 and your actual charitable gift to

Nature Conservancy is $90.00 because you received a $10.00 thank you gift, in exchange for your generosity.  

Thus far you have gifts to charity of $240.00.

You also have a charity called Union of Concerned Scientists that you feel does good work keeping businesses and politicians held accountable for choices put into action. Keep stories in front of the public eye, looking out for issues that are important to you. You choose to send your cash gift along with your written statement for the amount of $100.00. You receive a calendar valued at say $15.00 and they do some outreach work to congress, which they indicate is valued at say $25.00.  In this case being used as an example: $100.00 – $15.00 – $25.00 = $60.00. So your charitable gift is $60.00.

So now you have charitable gifts amounting to $300.00.

When the tax payer is a Single or a Married Filing Separately tax payer , the charitable giving that you made during tax year 2021 can be taken as an adjustment to income even though you might not itemize, up to the amount of that $300.00 figure.  You need to keep your proof and you need to keep this information used on your tax return with those tax return documents that you will keep in a safe place in the event you have a need to substantiate your charitable giving. Or any reason that you might have to pull out that tax return.

For the Married Filing Jointly Tax paying couple You can actually benefit from those gifts to charity which are considered cash contributions you made to your charities of choice up to an amount of $600.00 when you do not itemize on your return.

A single tax payer up to $300.00 as an adjustment, the married filing jointly couple can benefit from up to $600.00 as an adjustment to income regarding what falls into the classification of qualified cash contributions.

For the tax payer who does itemize and utilizes the Schedule A, they will not take the adjustment to income, they will instead list each gift to charity on the itemized deduction portion that is used for charitable giving tabulations.  Which is the portion of the tax return where someone who intends to itemize. When a taxpayer itemizes their charitable giving they also be able to include their non cash gifts to charities.  You know that receipt you are offered when you have brought that closet full of clothes that are in good or better condition. But you know that you do not intend to wear any of those clothes again. For the folks who do intend to itemize accept that receipt with a smile and attach your already prepared list of items to that receipt.

Benefit from potentially significant medical care out of pocket expenses, and their mortgage interest paid, and state taxes paid on their home and their vehicles, and the gifts to charities and their non cash gifts to charities you want to have that list of the items donated. And the value at purchase and the value to the charity at time of donation. And attach that list to the receipt you are given. Because later when it is time to provide your documents to your tax preparer, it is unlikely that you will accurately remember what you actually gave in the form of non cash gifts.  And that list you put together when you were gathering items from the closet will have been something that you have really appreciated that you were so well prepared to provide your tax preparer.  Since only you will have a good idea of what you pay for items when you purchase them, it is up to you to provide that detail. And since only you know if the items are in good or better condition, or like new condition, it is also up to you to provide that detail as well .Your tax preparer can print out a list to use as a guide to determine values of non cash contributions. And then you can do your computer research on that complete set of china you inherited that has to be hand washed and you have no desire to put that china in a china cabinet that you do not have nor do intend to make part of your floor plan design.

And some things you simply need to get appraised when there are a truly valuable item. To have a written substantiated document by the appraiser to support your position.  

And then of course one of these days the ladies bake sales group effort will return,  and the mens special club interest to raise funds for the special efforts will return. The organization has taken to heart and supports with joyful monthly meeting will return. And you go to the store and purchase your baking supplies. To make the famous recipe that you have become known for making. Or gather that lumber and nails to help someone with a new ramp, your men’s club via the recognized charitable club has taken on a new mission to help those in need. You club has seasoned bakers, and your club has retired craftsmen who love helping others and and occasionally testing their trade skills and keeping fresh and learning new skills from the new guy who moved to your area from a different region. Everyone has fun, everyone helps others and everyone learns a new skill from someone else.  

You paid good honest money for those supplies so that the federal qualified charitable organization via its member could do their good works. So the group or the club,  could achieve the results desired.  It is a gift to the recognized charity making these things possible. So yes, keep that store receipt, make a copy of it, and get the master arm of the charity, such as the church and church secretary  a copy and ask to have that amount added to the list of items you have given during the years annual period, they should be able to include the line items accordingly.  You will be grateful,  that you made it so easy for the bookkeeper to add that amount to your annual giving statement.  You just made completing your itemized deduction much easier. And you will have the proper documentation needed.

Updated by Kristin P Sinclair

A Accu Tax

Rock Hill, SC

May 6, 2021

803-329-0615    

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Tax Planning so many things to plan for

by Kristin P. Sinclair  –  A Accu Tax  –  May 3, 2022

The American Rescue Plan has helped the Low to Moderate income American Wage Earner in so many ways.  And of interest many and in some areas most hard working taxpayers fall into what could be considered low to moderate income.

Income limits and investment income limits have been increased for more families to potentially  qualify for earned income credit. Low to Moderate income families may be able to plan better and then also potentially qualify for a tax credit for putting money into your retirement plan.

So if you have a group health plan with a high deductible health plan, put your maximum amount in your HSA this will lower your taxable income and provide tax free dollars to pay for the health care needs for your health out of pocket needs.  And you can keep saving and saving in the HSA up to the allowed annual limit and be tucking even more dollars away for health care needs later on into the future.  An HSA is not a use it or lose thing, it is a saving vehicle for you to minimize paying taxes on those HSA contributions. Use those dollars for health care and those dollars will not be taxable. Dental Vision and RX count as valid healthcare dollars spent that will not be taxed. Keep your receipts. It is pretty basic and can help you manage you budget.

Put those retirement dollars in your 401K. That spousal IRA that you have thought about could be more of a priority helping you plan for the future.

If your employer has an FSA available to you for child care allocation and other qualifying FSA expenses maximize that FSA funding. Those dollars are not taxable when used according the IRS guidelines. Ways to lower you taxable income, which could potentially help more families with children qualify for more assistance.  Planning ways to utilize income and making less of the income taxable might just make a difference to more families.  Allowing for more government tax credits.

Families with Dependent children with a need for Dependent Care Benefits to allow for the care needs of the children while earning a livelihood can as an employee, help find savings by excluding more income from taxes from gross income via (DCAP) Dependent Care Assistance Program through salary reduction pre tax dollars earnings to coverage dependent care expenses. Discuss with your Human Resources the Consolidated Appropriations Act how you can make use of the DCAP.

Families with dependent children will have greater amounts of child tax credits, and some of the funds can be available during the annual period making shifting allocation of funds a bit easier.  The advance child tax credit payments will equal half of the estimated child tax credit which will be claimed on the 2021 tax return.  So if half of something is received early, those dollars also have to be justified and reported as received on the tax return.  

If the family would rather not receive a monthly allocation in advance the  tax paying family should review the web site indicated below. Determine if a request that in instead of receiving funds early monthly, the family can request to simply utilize funds receipt when they file their tax return. Which is what families were accustom to previously. With potentially higher amounts impacting the numbers possible at time of tax filing.

For a family with children, who feels that they may actually have a tax due situation. Or significant income and pretty certain their income levels will create a need to repay some of the advanced child tax credit. Putting in a request to not receive an advance child tax credit monthly during the annual period but instead receive those funds with the tax filing could potentially help their situation.

See on www.irs.gov so much information for the tax payer.  

https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021.

Some great information for review and assistance in planning.  The IRS has provided a portal for you to have a greater level of control. The IRS has created a Child Tax Credit Update Portal as well as an Eligibility Assistant.

As always, the wage earners need to withhold adequately during the annual period based upon the income month by month to make the tax filing a more comfortable experience. When both adults in a Married Filing Jointly return family are wage earners combined incomes can create a higher withholding need than each wage earners income independently suggests might be adequate.

Do you have some charitable giving that you want to do. But with the higher standard deduction for 2021 feel that you will not itemize. Save those acknowledgment receipts from your cash gifts to your charities. You might still be able to take an adjustment to income on your 2021 tax return based upon the allowable amount available.

And if you are a teacher and you are working the qualified number of hours for athe school system, you might be able to make the adjustment to income to offer you little bit more in your pocket at tax time.

Saving funds in a 529 plan for the time when your precious child heads to higher educational opportunities can help make College more realistic and affordable. Even if you are fortunate to have a scholarship or multiple scholarships cover much of the academic expenses associated with college, the 529 funds can also be used to help cover costs associated with meals and housing. Which most educational tax breaks do not help you with. So planning ahead with 529 funds can truly make a difference when college is fast approaching and you are more prepared to make the transition a bit easier for your college bound bundle of joy. And if the Grandparents want to help safe that is a great opportunity as well.  A bit saved every year in a 529 plan for many years can really make a difference.

Kristin P Sinclair A Accu Tax

Rock Hill, SC

May 3, 2022

803-329-0615

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Capital Gains and Losses and Interest and Dividends

by Kristin P. Sinclair  – A Accu Tax  – May 24, 2022

You have some stock and you decide to sell and take your profits. Or limit your losses. Folks have various reasons to sell a capital asset at different times. Expect to receive a 1099-B for tax reporting purposes.  Well it is a bit more complicated than that. Is your sale short term, some capital asset, you have held for one year or less, or is your sale long term, some capital asset you have for a period at least a day greater than a year.

If you inherited the capital asset, it is treated as a long term asset to you the beneficiary of the capital asset.

Other things to consider, what is your income, the lower the income, the lower the tax rate on your sale of long term capital gains. The higher your income the higher the tax rates on your sale of your long term capital gains. And in certain income situations you could have a special circumstance higher rate on your capital asset gain.  So if you have a tax liability you need to plan accordingly. You are going to want to consider making estimated tax payments if you have not already paid enough into the system with your withholding from other sources.

If you are selling capital assets that have been held for a year or less you will have a significant tax rate on gains once you have any tax liability for your combined sources of income. So once again if you have not withheld enough from other sources of income, you are going to want to consider making estimated tax payments.

Now let’s look at some additional planning. You decide to sell a capital asset and you have a gain. And you decide to sell a capital asset that you have a loss. The two events could balance each other out financially. You have actually helped to lower the potential tax issue on the gain. If the loss exceeds the gain you can also actually lower your overall taxable income by up to $3000.00 in the tax year. And carry over losses into future years. There are various reasons folks take various approaches in any given annual period.

Many of you have noticed that when you have holdings in certain capital asset investments. You also receive a reporting document called 1099-div. You might be using those dividends as current income to enhance your retirement.  You might be using those dividends to purchase additional assets. Either way dividend income reporting is applicable. A tax issue can occur.  You might also have a 1099-int issued to you and yes a tax issue can occur.

If adequate taxes have not been withheld from various sources, paying the tax obligation via an estimated payment during the year can make your filing experience less stressful.

For the higher income situations an additional tax liability also needs to be factored into your estimated payment planning. Net investment Income Tax is a 3.8% additional tax once income exceeds the established threshold.

And then if the taxpayer(s) are medicare beneficiaries they also need to consider that your medicare premiums will also be impacted by your tax situation as well in what is by the number on the year applicable two years after the current tax filing. Each year stands on it’s own merits.  And resets on it’s own merits as well. But the Medicare Premium Income Adjustment will be a result of what happened from two annual periods prior.  Income from 2021 which is reported in year 2022 on the tax return will impact potential medicare premiums in 2023. So yes tax planning is something which needs to be top of mind for several reasons.

Kristin P Sinclair

A Accu Tax

803-329-0615

May 24, 2022

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Retirement Income Tax Planning

by Kristin P. Sinclair – A Accu Tax – May 10, 2022

Recently Carol has had to make several expensive trips to the car repair shop, and she has decided now is the time to trade up.  Carol will be researching 2022 models and plans to purchase a new vehicle with a nice warranty.  Carol is looking for one of the newer style trucks with an extended cab, and a smaller truck bed just the right size for the things that she looks forward to doing like hauling yard work supplies. Since Carol is an avid bike rider, she will also have the appropriate hitch added to her truck, with a new bike rack that she can put on and take off as needed. She feels this truck will provide her reliable transportation and has a warranty that will provide her peace of mind.

Carol has not had a car payment for five years.  She has been saving for her down payment, and would like to pay off her new truck in three years or less. Carol is aware that the current higher standard deduction with no exemption taken tax law will expire in 2025 based upon current guidance. And Carol wants to have her expenses more predictable before the 2025 tax year.  Carol does not have a home mortgage payment and has two credit cards that she pays off every month. She feels confident that she will qualify for a low interest rate truck loan.  Obviously, Carol has been considering many factors in this truck purchase decision.  Carol is also aware that having a truck payment history added to her credit score will help keep her credit rating high.

Carol enjoys her part time job; enjoys the people she works with and the folks she meets at work.  She also likes the extra spending money.   She doesn’t want the new truck payment to crimp her lifestyle.  Carol has 15% federal and 7% state taxes withheld from her monthly pension.  Plus 10% federal taxes withheld from her Social Security income, and 5% of her part-time job income withheld for state taxes.

Carol plans to discuss with her tax preparer Kristin her plans for 2021 tax year preparation, and the tax impact of withdrawing extra funds from her Traditional IRA to help with her truck down payment.

Carols’ home state does not tax her on her Social Security income, even when the federal government taxes her based upon her provisional income. Carol’s home state provides an additional tax break since she is over 65 years of age.  She also qualifies for an additional tax break on her long-term capital gains from her investment capital gain income.

Carol has some friends advising her to pay her new truck outright and skip the loan payment.  Before making a final decision to take an additional $15,000 out of her Traditional IRA Carol waits to discuss this with Kristin her tax preparer.

Carol tells Kristin that with an additional $15,000 Carol can keep her payment low and pay off the truck loan in less than three years.  Kristin determines that an additional $15,000 IRA withdrawal all in one year, most likely would increase Carol’s taxable income if all other income remained similar to the prior year.  So much so that significantly more of Carol’s income would now be in a higher tax bracket.  Kristin also determines that there would be more taxes on Carol’s capital gains, and more of her Social Security income would have to be federally taxable.  Plus that additional Traditional IRA distribution would also increase Carol’s state taxable income by enough to move her into a higher state income tax bracket.

Kristin advises Carol to take $5,000 from her Traditional IRA this year to add to her down payment.  Then in early January 2022 Carol should take an additional $5,000 from her Traditional IRA and make a principal only payment on her truck loan.  Finally, in January 2023 to take an additional $5,000 from her Traditional IRA and make another principal only payment.  This should only move a little more of Carol’s Social Security into the taxable column.  Carol will pay a little more in taxes on her upcoming tax return, but still will have already withheld enough to cover the obligation.  However, she should still receive tax refunds as she has in the past just not as much as the prior annual return.  Plus, she will be able to pay off her new truck in less than three years that she has decided is important to her!  

Smart tax and financial planning for retirement income living !  

Kristin P Sinclair   A Accu Tax   (803)329-0615  May 10, 2022

Written in Rock Hill SC

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About Taxable Income

by Kristin P. Sinclair  – A Accu Tax – May 14, 2022 – Rock Hill, SC – Charleston, SC

Taxable Income

The IRS describes taxable compensation in general terms as what you earn from working.

This includes, wages, salaries, tips, professional fees, bonuses and other amounts you receive for personal services. We are familiar with these traditional concepts of taxable compensation.

Let’s expand this conversation further to include the concept of the Barter economy of being paid for services rendered. You have a business venture and are self directed, possibly self employed. You have the ability to determine that instead of being paid in a more traditional monetary value for the work you complete you are willing to accept Widgets valued equal to what can be utilized to further your future work.

You have determined that the Widgets value is equal to the work completed if paid in more traditional monetary value. You have been compensated in general terms for work completed. This value is to be included in your taxable compensation, and you in turn have a tax liability for the compensation and factor in your cost of doing business just like you would if you had been paid in a more conventional monetary fashion.

Let’s expand further the conversation to include the concept of Treasure Trove. You find Treasure. You are able to prize this treasure for its value to you and the conventional value of this treasure. Whether you convert this treasure into a monetary value, or you hold this treasure in a vault, you have a taxable value added to your taxable income. This however is not necessarily an example of self employed income but taxable all the same. Once you have acknowledged and paid the tax liability you at that point have a cost basis on this treasure you have found.

Let’s expand further the conversation to include the concept of scholarship income. Your student has excelled and has been awarded scholarships that exceed the cost associated with the cost of the education during the annual period. Your student does have taxable income realized as a result. It could be tempting for your student to use all of that additional money to pay for lifestyle choices, but since a tax liability exists it would be prudent to account for this obligation.

www.IRS.gov is a fabulous resource for more information. And / or consult your tax advisor.

 

May 14, 2022

Updated in Rock Hill, SC and Charleston, SC

by Kristin P Sinclair

A Accu Tax – 803-329-0615

 

 


Let’s Look at Some Tax Planning

by Kristin P. Sinclair, A Accu Tax on June 22, 2022

Term Life Insurance

Let’s Look at Some tax planning.

For Mustang Sallie, 2022 is the year Mustang Sallie needs to purchase a new car. She has been doing her research. Ms Sallie plans to purchase her 2022 model in September prior to the 2023 models debut. Ms Sallie wants to benefit from a federal tax credit for New Qualified Plug-In Electric Drive Motor Vehicle Credit. Mustang Sallie has found the vehicle she wants. She has had the electrical needs met at home so she plans roll out each day with the appropriated charge that will be needed for Mustang’s busy life.

She is looking for the reliable transportation she needs in a vehicle at a premium that is realistic for her to purchase. With a warranty She feels will be great for peace of mind.

2022 some new Qualified Plug-In Electric Drive Motor Vehicle Credits were announced. And Mustang Sallie knows exactly what she wants, and she plans to benefit from the $7,500.00 tax credit that she is going to be getting and she is going to use that to pay down on car loan making an principal only extra payment.

Let’s take a look at Mustang Sallie’s options taken, and options considered. She expects her tax rate to change federally and believes that she is withholding ample amounts. Still anticipates receiving a refund both federally and from her state return. Ms. Sallie plans to take some capital gains which will be reported on her tax return.  Ms. Sallie also has some capital losses which will be reported on her tax return. This way she is limiting her taxable income and keeping her capital gains taxes exactly where she wants them to be taxed.

Mustang Sallie has been saving for a new car ever since She paid off her current vehicle. As of late she has had to make many more trips to the repair shop and is going to make a change soon.

Ms. Sallie has $15.000 saved to put down on her new vehicle to lower the amount She is borrowing at a very low interest rate. The federal electric motor vehicle credit will provide some additional principal only payment opportunity when she gets her tax refund in 2023.  She will pay off the vehicle faster than she initial thought she would. Mustang no longer has a house mortgage payment, and she is aware that having a current credit record is to her advantage. She plans to pay the loan off in a couple of years. Ms. Sallie is going to be thoughtful in her approach.

Mustang Sallie enjoys Her part time job.  Her part time job has made it so much more enjoyable to feel free to invest in herself. With walking shoes, athletic socks, insoles and exercise apparel. Her part time job has been wonderful. And she feels that it is keeping her really in touch with how things do indeed keep on changing.

Mustang has two bank accounts. One account is the one she has her paycheck, her Pension check as well as her Social Security Check direct deposited into.

Mustang has a bank account that she has her capital gain funds deposited into as well as her federal and state refunds.   She uses this bank account to pay medical bills, her Medicare Supplement premiums, and RX copays, property taxes and vehicle taxes as well as her car payment.

Mustang takes $20,000 annually from her pension plan and has in the past had 15%withheld for federal taxes. She also has 5% withheld for her state taxes. She expects a refund.   Social Security income she will receive $19,000 in benefits. Ms. Sallie has also chosen to have 7% federal taxes withheld from her Social Security income equal to $1330.00 with held over the 12-month annual period, plus she pays her Medicare Part B and Medicare Part D premiums from her Social Security income. These insurance deductions total $2071.20 during 2021. The monthly amount that Mustang sees deposited into her account from Social Security is $1,274.90.

For Mustang’s Medicare Supplement she has a High Deductible Plan G HDG plan which has low premiums. She is keeping the plan she really appreciates for it’s coverage and its value. Some out of pocket exposure; yes, she can seek medical care from any provider who accepts Medicare beneficiaries anywhere, yes, in the United States. She remains active in life, enjoys laughter, and loves time with friends. Exercises regularly. She feels very confident about her plan choice.

While Mustang has paid her mortgage in full, each year she still needs to pay the property taxes on her home directly to her county since it is no longer being paid via an escrow account, since she does not have a mortgage payment anymore. She is fortunate to live in a state where she enjoys a Homestead Exemption, which lowers her property taxes due a little. Since, she is purchasing a new car and her car taxes are going to go up as a result.   This tax increase may be substantial, so Ms. Sallie knows she needs to plan. When her taxes are due on her new vehicle, she will be ready.

In the event Sallie, needed to move funds from one checking account to the other she does so accordingly. Keeping those funds in separate accounts works well for Mustang Sallie, and her planning for her annual obligations.

Mustang Sallie likes getting a tax refund, so when her tax documents arrive, she makes withholding changes so she feels confident that she has withheld enough in taxes that will be getting a refund for the upcoming annual period. Ms Sallie wants to look at how taking funds out of a Traditional IRA might impact her next year. When she knows that she will have a car payment due for 12 months in 2023.

SC is Mustang’s home state. SC does not tax her on her Social Security income even when the federal government taxes her based upon her provisional income. Her state gives her an additional tax break since she is over 65 years of age. And her state also allows an additional tax break on 44% of her long-term capital gains from her investments in the form of capital gain income.

Mustang Sallie wants to do some additional research before the purchase of the electric vehicle. She asked Kristin, her tax preparer, to look at some numbers for her. If She takes out an additional $15,000 in taxable income in the year how could that impact her. Had the need arisen to take out an additional $15,000 in taxable income from her Traditional IRA. Well, her taxable income would have increased by over $22,000.00. Putting some of her income into the 22% tax bracket instead of a 12% tax bracket.   The answer is more taxes on Mustang’s capital gains would be applicable as well. More of Her Social Security income would have become federally taxable, and that additional IRA distribution in turn would have increased Mustangs state taxable income by enough to move Mustang into a higher tax bracket for the state as well.

So for Mustang Sallie, continuing to work at a jobs she enjoys, spending time with people she likes to be around, and getting a lot of joy and laughter into her days, this has been a good decision. She enjoys walking with her new friends when not at work. The occasional new pair of shoes and new socks and insoles is a great investment in herself.

Taking out only what she really needs to, from her pension, and saving her IRA for when she absolutely must start taking distributions has been very workable for her lifestyle. Drawing from capital gains income when needed, has also been a wise choice to pay for things needed or wanted. Including in her case a new car.

Even if the tax rates change again in 2026, she has a goal of being ready and prepared when it comes time to make a major purchase decision like her transportation, to visit important people in her life. Working part time, traveling occasionally, exercising daily. This for Mustang Sallie is a nice balance for a full life.

 

Kristin P Sinclair

A Accu Tax

June 22, 2022

Updated in Rock Hill

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Long Term Care and Home Health Care

Updated by July 30, 2022

Your Home Showcasing Strategy

by Donn J. Sinclair, MBA   May 10, 2022

Curb to Door Appeal

The first impression that your home makes on prospective buyers as they approach your home should entice them to step out of their car and enjoy the upcoming showing.  Clean, or have someone clean the gutters so they are free of any visible leaves and debris.  Your roof should not look like it is need of imminent replacement.  You or someone should hose down the exterior, plus use a soft brush or sponge mop to clean hard to reach soffit and fascia,  plus the doors, windows and frames.  Your front entryway should sparkle.  Thoroughly clean the doors, replace any tarnished hardware, and replace any dingy or burnt out lighting.  A new front doormat might be just the final touch.

Do your window and door frames need a quick coat of paint ?  Brighter more current trim colors can definitely update your home’s curb appeal.   Fertilize your lawn to bring out the green !  Plant bright vibrant flowers in beds and planters.  Trim back shrubs and trees to make your home and yard appear larger.  All fencing, lawn ornaments, porch furniture should look like new.  Fresh mulch is always a plus to accentuate colorful plants and flowers.

Your Rooms Set the Stage

Your #1 objective in staging is to have prospective buyers imagine that your home is their next home.  Start in your main living areas and thoroughly clean, polish, and de-clutter every room in your home.  This is a great time to start the process of eliminating those items that will not make the move with you.  Sell, pass on, or pitch those items that no longer serve your needs.  If it looks worn to you, then it probably will to buyers and needs to move on.  Maximize your floor and visual space when you clear high traffic areas of excess furnishings.  More space and light allow prospects to imagine the possibilities.  Less is more, and visually expands and brightens your home.

This definitely applies to cabinets and closets.  Once again, if the item is not going to make the move, then move it out now.  Your closets, cabinets, and drawers should be a third to one half empty.  This makes them appear larger and more spacious.  Besides, do you really need to keep those broken toys and mismatched socks ?      

Also start to pack up your family photos, trophies, posters, etcetera throughout your home.  You want buyers to envision their special photos and memorabilia in your rooms.  Set the stage for buyers to envision your rooms as their rooms.  Your home as their home.  Visualize their furnishings in your home.  Now clean and clear your way back through your home so that your home really sparkles and shines.

Repair and Maintenance

Most buyers are not looking for a fixer-upper.  Rather buyers want to bring their stuff, move in, and have friends and family over and show off their new home.  They want to  close on their loan and start the next chapter in their life.  From light bulbs to the sink disposal, everything that should work – everything must work.  Your buyer should be visualizing enjoying themselves in your home – not making a projects to do list.  Send a positive message that your home has been well maintained and there are no deferred maintenance items.  First tackle the least expensive and easiest repairs to whittle down your list.  Know your limits and acquire or hire help for those projects beyond your abilities.  Very very important – this is repair and maintenance – not remodel and renovate.  Why spend time and money to update for your tastes.  Your buyers will have their own tastes.  Let them make those choices.      

Trash or Treasure

Because this is Soooo Very Important, let’s return to those cabinets, closets, drawers, built-in shelves, attics, basements, and garages.  They all look and feel much larger and more spacious with less stuff.  Larger and more spacious with less stuff sells faster.  The fastest, easiest, and nearly painless way to de-clutter is to sort to five classifications: move, maybe move, donate and pass down, and trash.  

The easiest place to start is to “Trash the Trash and Don’t Look Back”.  Place the donated items in your vehicle and immediately donate these items.  Phone today to schedule pickups for larger donated items.  Start to pack both the non-essential move and maybe move items.  It would be great if they can they be stored for a short while with family, friends, or at a self-storage facility.  Just the thought of storage may shift some items from your move or maybe move lists. Remember that less is more, and the object is to stage and showcase your home, and not yesteryear’s treasures.  Merry Moving to You and Yours !!!

 

Cleaned, Cleared and Closing from Charlotte NC and Rock Hill SC

by Donn J. Sinclair, MBA   (803)329-0609

May 10, 2022

 

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Asset Allocation for Your IRA

by Donn J. Sinclair MBA  – May 26, 2022

Asset allocation is the mix of investments you select for your IRA.  Specifically, what share of your IRA portfolio do you have invested in stocks, bonds, cash, and any other asset classes.  Your IRA could be a Traditional IRA, IRA Rollover, Roth IRA, SEP-IRA, or SIMPLE-IRA.  Your temperament for risk should be a major criterion in your selected asset allocation mix.

Finding Your Mix

The asset allocation concept is relatively simple: Don’t put all your eggs in one basket. Sometimes, the implementation may be somewhat more complex. Your chosen asset mix for your IRA depends largely on your time horizon, your personal financial situation, and your risk temperament.  Some personal financial considerations include: will you and/or your spouse continue to work seasonally or part-time during retirement; what are your retirement savings to date; the percentage of your retirement savings that are post-tax or are pre-tax(IRA, 401k, etcetera).  

The length of time you have to invest before you will need your retirement funds is your time horizon.  Your IRA portfolio may have several time horizons because you have multiple financial goals.  At times the different financial goals may seem to be in conflict.  

Your Tolerance or Risk Temperament

This is your emotional willingness and financial ability to take risk in pursuit of reward with your IRA.  You should examine your income, your assets, your responsibilities, and your ability to cope with the inevitable stock and bond markets ups and downs in calculating your risk tolerance.  When your household is pursuing IRA financial goals, then you should also consider your spouse’s risk tolerance.

Rebalance Your IRA Portfolio

Once you calculate an IRA asset allocation that feels right for you, then you should periodically monitor your allocation.  A portfolio that starts out with70% stock funds and 30% bond funds, may shift to 60% stock funds and 40% bond funds.  This happens if your bond funds should outperform your stock funds for a length of time.  Conversely, if stock funds outperform bond funds, then your IRA asset allocation portfolio may be overweight in stock funds.  

You should establish regular time periods to review your IRA portfolio, and rebalance your asset allocation as necessary. Should your IRA get out of alignment, then you may rebalance your portfolio by selling or exchanging assets in one category, and buying or exchanging assets in another.  Pay attention to any rebalancing costs.    

Changing Times and Course

As your time horizon shortens, and you get closer to your financial goals, then your ideal IRA asset allocation should change to fit your new situation.  Normally you should pursue a more conservative asset allocation when you have less time to reach your financial goals.  Life changes including: having children, caring for aging parents, loss of employment, and adverse health may also impact your financial goals and risk tolerance.   Your IRA asset allocation should change accordingly.  

A Few Words About Risk and Reward in Your IRA

You should carefully consider any savings and investment vehicle’s objectives, risks, expenses, and rewards.  Not all savings and investment vehicles may be appropriate for everyone.  Every individual is unique, has their own set of financial circumstances, and comfort level with saving and investment risk.  Also, prior to any IRA decisions or IRA investing, you should carefully read the available material to better understand the specifics of your selected IRA savings or IRA investment vehicle.  

You should consult your tax advisor or www.IRS.gov for more information.  The above information is intended as educational information and not as investment advice.  This is a great time to check and update the beneficiary designations on your Traditional IRA, Roth IRA, and any IRA Rollover.

Updated by Donn J. Sinclair, MBA

@Sinclair Financial Solutions

in Charlotte NC and Rock Hill SC

May 26, 2022   (803)329-0609

@Sinclair Financial Solutions is independently owned and operated.  Donn J. Sinclair, MBA is insurance licensed in NC & SC (NIPR NPN#1722815).  Investment Advisory Services offered through Prosperity Wealth Management, Inc., 2333 San Ramon Valley Boulevard, Suite #200 – San Ramon, CA 94583.  Securities offered through Fortune Financial Services, Inc., 3582 Brodhead Road, Suite #202 – Monaca, PA 15061; branch office of record located at 948 Myrtle Drive Rock Hill, SC 29730, Member FINRA/SIPC.  Sinclair Financial Solutions, Prosperity Wealth Management, and Fortune Financial Services, Inc are separate entities.   SC Real Estate License #76530, and NRDS #554027312.  Month 00, 0000