Mike Mead, EA, CTC’s Top 2024 Financial Strategies

The official tax season start date has landed—JANUARY 29th. That’s next week.

This is your cue to start gathering everything you need for your tax appointment. 

(Speaking of… have you booked yours with us yet? It’s early, so there are still plenty of spots open, but they do fill up fast, so don’t put it off. 

www.afitonline.com/appointments )

And this is my cue to update you on tax items that could affect you. You know that tax laws change rapidly. It seems like there have been plenty of changes in Washington that have rolled down to Jackson County people like you and me over the past few years. So, we’re staying vigilant in monitoring these changes to help you get access to the best tax benefits and protect you from potential issues.

1.    The IRS chose to postpone the 1099K reporting that affects receiving digital payments for services or products. It doesn’t mean you don’t have to report the income; you just won’t receive a 1099K from PayPal or your favorite 3rd-party payment platform.

2.    There are some changes/improvements in “green energy” tax credits for homeowners, landlords, and vehicle owners. If you invested money into solar panels, energy-efficient windows or doors, electric vehicle(s), or anything else related to green energy this past year, don’t forget to share the details with us at your tax appointment (what was purchased, date of purchase, and the amount invested).

3.    Student loan repayments can count as 401K contributions for some employees. Check with your Jackson County employer to see if they have a 401K matching policy. If you’re paying back your loans, this could be a great way to get some “free money” into your 401K.

4.    The IRS has more funding to step up enforcement. They are focusing primarily on high-income earners and certain business entities, but that doesn’t mean they won’t look into your situation if you haven’t taken care of things.

I give you these insights so that you’re taking advantage of every opportunity. That kind of insight can be a real game changer in this economy.

Now, last year, our wallets were stretched pretty thin by inflation. Things feel a little better right now for some, but not for everyone.

In a fluctuating economy, you find out just where you’re weakest in your financial situation. Now that we’re diving into a new year and with the realities of the past as a guide, let’s take this opportunity to look at how to make improvements in your situation. 

Mike Mead, EA, CTC’s Top 2024 Financial Strategies

“A nickel ain’t worth a dime anymore..” — Yogi Berra

 

In this climate where the economy and your wallet send mixed signals, the smartest move is to arm yourself with knowledge and strategies that turn any challenges into opportunities. 

You’ve got to figure out how to adjust for the bigger picture things that trickle down to affect your financial state in any year, but especially for this year. 

So, let’s take a dive into some key financial areas that could help you survive financially this year – and even come out thriving(?)

2024 Financial Strategy #1: Debt management in a high-debt climate

We all know our national debt is high and the continued political turmoil means there’s a likelihood of tax policy revisions​​. Those decisions usually have a significant impact on your wallet. As the economy continues to fluctuate, it’ll be crucial for you to figure out how to tackle your own debt so you can find some solid ground financially. 

Deeper insight: Focus on reducing high-interest debts first. Strategies like balance transfer credit cards or debt consolidation loans can be effective. And if tax changes do roll out, you know I’ll be here to keep you updated and offer key insights to keep you from tax debts getting added to your debt balance.

2024 Financial Strategy #2: Savings in a low-disposable-income environment

Even with a squeeze on disposable income, saving remains a critical component of financial health. With interest rates rising, your savings can work harder for you. 

Deeper insight: Embrace automated savings plans. Small, regular contributions to high-yield savings accounts or CDs can lead to significant long-term growth. This approach is particularly effective in preparing for unexpected expenses or long-term financial goals.

2024 Financial Strategy #3: Insurance and tax planning for optimal savings

It’s time to review insurance policies to make sure you’re not paying more for insurance than you should. There could be savings possible if you double-check that your insurance costs are reflective of your current life situation.

The same goes for taxes. When your life situations change, it could mean restructuring or making moves that will actually benefit your tax standing with the IRS. If you don’t, you could be paying more than you should or you could be missing out on real deductions and credits.

Deeper insight: Schedule an insurance review and tax planning appointment and plan to do those on an annual basis. Look for changes in life circumstances that might lower premiums. On taxes, consider strategies to maximize deductions and utilize tax-advantaged accounts. Consulting with a tax professional can help identify opportunities tailored to your specific situation. We’re glad to be that person for you (it’s what we love). 

2024 Financial Strategy #4: Preparing for a recession

While the talk of recession has receded somewhat, the possibility does still loom in the background. If it does rear its ugly head, you obviously want to be financially prepared to face it. 

Deeper insight: Prioritize building a robust emergency fund this year. Aim to save enough to cover several months of living expenses. This fund acts as a buffer against unexpected financial shocks. 

Additionally, focus on budgeting effectively and continue reducing debts to strengthen your financial position. 

This year, understanding and acting on these key 2024 financial strategies can make a big difference in the stability of your financial world. As we head into an election year and continue to navigate the complexities of tax law changes, changing interest rates, and other financial factors, staying focused on improving things for you will be more critical than ever. 

And remember, we’ll always work to keep you informed. If you want help from a reliable Blue Springs professional with your situation, my team and I are here and ready to help.

Getting you on solid financial ground this year,

 

Mike Mead, EA, CTC

The Effect of Student Loans on Your Taxes

 

Higher education is a valuable investment in one's future, offering opportunities for personal growth and career advancement. However, pursuing a college degree comes with a hefty price tag for many individuals. Many students turn to student loans to ease the burden of tuition and related expenses.

While these loans can open doors to education and career prospects, they also have implications that extend beyond the classroom. One significant aspect to consider is how student loans can impact your taxes. In this blog, we'll delve into the effects of student loans on your taxes and offer insights into navigating this financial landscape.

Understanding Student Loans and Tax Implications

Student loans are funds borrowed to cover education-related expenses such as tuition, books, and living costs. There are two main types of student loans: federal and private. The government provides federal loans, typically with more borrower-friendly terms, such as fixed interest rates and flexible repayment options. On the other hand, private institutions offer private loans and may have varying terms and conditions.

While student loans can be beneficial in funding your education, they also bring about certain tax considerations that borrowers need to be aware of:

1. Interest Deductions:
   One of the most notable tax benefits associated with student loans is the student loan interest deduction. This deduction allows eligible borrowers to deduct up to $2,500 in interest paid on qualified student loans from their taxable income. To claim this deduction, you must meet specific income requirements and use the loan proceeds solely for qualified education expenses.
2. Qualified Education Expenses:
   It's essential to differentiate between the types of qualified education expenses. Generally, tuition, fees, books, supplies, and required equipment are considered qualified. However, expenses like room and board, transportation, and personal items are not typically eligible for deductions.
3. Income-Driven Repayment Plans:
   For borrowers on income-driven repayment plans, the remaining loan balance may be forgiven after a certain number of qualifying payments. While this forgiveness can be a significant relief, it's important to note that the forgiven amount may be considered taxable income, potentially resulting in a tax bill in the year of forgiveness.
4. Employer-Provided Education Assistance:
   Some employers offer education assistance programs that contribute towards an employee's student loan payments. In certain cases, these employer contributions might be tax-free up to a certain limit, providing an added financial benefit.
5. State-Specific Benefits:
   In addition to federal tax considerations, some states offer tax incentives and deductions related to student loan interest payments. Research your specific state's policies to uncover any additional financial benefits.

Navigating the Landscape

Given the intricate nature of student loan tax implications, it's crucial to approach this aspect of personal finance with diligence:

1. Keep Detailed Records:
   Maintain accurate records of all loan-related transactions, including interest paid and any relevant documentation. This will prove invaluable when it's time to file your taxes.
2. Explore Deductions:
   Research and understand the student loan interest deduction criteria to ensure you maximize this tax-saving opportunity. Consult with a tax professional if you're unsure about your eligibility.
3. Plan for Forgiveness:
   If you're on an income-driven repayment plan and anticipate loan forgiveness, factor in the potential tax consequences of the forgiven amount. Setting aside funds to cover the resulting tax liability might be prudent.
4. Consult a Tax Expert:
   Tax laws and regulations can be complex and subject to change. Seeking advice from a tax professional or financial advisor can provide personalized guidance tailored to your situation.

Student loans are a financial tool that can help pave the way for higher education and future career success. However, they also carry tax implications that borrowers should be well-versed in. Individuals can confidently navigate the intersection of student loans and taxes by understanding the student loan interest deduction, tracking qualified education expenses, preparing for potential forgiveness-related taxes, and seeking professional advice.

Remember that a solid grasp of your financial landscape will empower you to make informed decisions and secure a brighter financial future.

If you have questions, please contact our office at 816-220-2001 or at https://www.afitonline.com/.

Mike Mead, EA, CTC

Alliance Financial & Income Tax

Tax Appointment Musts for Jackson County Tax Payers

 Playoff season in the NFL is always action-packed. Add crazy weather, and things get even more interesting. Kansas City fans shivered their way through sub-zero temperatures — the 4th coldest game in NFL history — and the Bills/Steelers game was rescheduled thanks to a massive snowstorm and travel ban. 

 

I know from watching these games that you have to be PREPARED to sit for 3-4 hours in that cold. If you don’t prepare, you won’t last — no matter how epic the plays — or you could end up in a worse situation. 

 

Preparation is about more than survival, though. Preparation is also the key to getting things done efficiently and well. Now, here, I’m not talking about the weather. TAX preparation is on my mind because I’m a tax professional on the cusp of the filing season. 

 

Speaking of which…

 

The IRS announced last week that tax forms will officially start to be received on January 29. And, thanks to a larger budget from the American Rescue Plan, they’ve been able to consistently improve and modernize things for you, which means they’re pushing the electronic route more strongly. (Note: Paper returns will take MUCH longer these days). 

 

Now, you and every Jackson County taxpayer can view your tax records (amount owed, payment history, prior year adjusted gross income, and other tax records), make payments, and even double-check any authorization requests filed by your tax pro. All you have to do is log in to your online account. 

 

Let me be straightforward: you know that you can file taxes yourself or use tax software. In a few uncomplicated cases, the software can work just fine (generally very simple returns – single filing status, one income, no assets). 

 

But I’ve also seen where software poorly handled even simple cases. Because software isn’t inclined toward the individual user, they’re algorithmic. They rely on formulas. But your life and tax situation are complex, and the software doesn’t understand you.

 

Knowing my clients’ situations is at the top of my priority list. This kind of detailed knowledge and the understanding that comes with it ensures everything is properly handled and every legal deduction is taken (without errors). 

 

If you want that kind of security, let’s get something scheduled right away:

https://www.afitonline.com/appointments

 

And, to be prepared, let’s talk about what you’ll need for that tax filing…

 

Tax Appointment Musts for Jackson County Clients
“Action is the foundational key to all success.” -Pablo Picasso.

 

Filing your taxes on your own is not for the faint of heart. That’s even with the nice-looking software on the market and the expanding influence of AI — which purports to make it easy for you.

But that’s what I’m here for. Let my team make it *easy* for you.

Below is a list of what you will need during the tax preparation process. Not all of the items will apply to you — probably MOST will not. Nonetheless, it’s a helpful checklist.

 

Before you get overwhelmed: Yes, this is a long list — but the unfortunate reality of our tax code is that it’s not even comprehensive! These items will cover a majority of my clients. This is to ensure I can help you keep every dollar you can legally keep under the tax code.

 

But I’ll be your guide. That’s what I’m here for.

Even if, for some strange reason, you won’t be using our cost-effective services this year, feel free to use this list as a handy guide…

 

Personal information

Social Security numbers (including your spouse, children, and other dependents)
Residential address(es) for 2023
Dates of birth
Type of dependent relationship
Last year’s or most recent federal and state tax returns (if we don’t have them on file) 

 

Employment & Income (a whole lot of 1099s)

W-2 forms for 2023 
“Payment Card and Third-Party Network Transactions” (1099-K – and you may get one of these no matter how little you made. Report the income.) 
Tax refunds and unemployment compensation (Form 1099-G, “Certain Government Payments”) 
Miscellaneous income, including rent, prizes, and awards (Form 1099-MISC & 1099-NEC) 
Partnership, trust, and S-Corp income (K-1 – notorious for arriving late, but only because they don’t have to be out the door until February 15) 
Social Security Benefit Statement (SSA-1099/1042S) 
Distributions from profit-sharing or retirement plans; IRAs; annuities, pensions, insurance contracts, survivor income benefit plans; permanent and total disability payments under life insurance contracts; and charitable gift annuities, among others (1099-R) 
Gambling winnings (W-2G)
State and local income tax refunds (1099-G)
Records for alimony received, jury duty pay, and any other tax credit information for 2023

 

Financial Assets

Interest income (Forms 1099-INT & 1099-OID)
Dividend and distribution income (Form 1099-DIV)
Money from broker transactions (Form 1099-B)
Cryptocurrency sales (including coin-to-coin trades) – report of any cryptocurrency activities
Records for capital gains or losses

 

 

Health Insurance Information 
Form 1095-A, Health Insurance Marketplace Statement
Form 1095-B, Health Coverage
Form 1095-C, Employer-Provided Health Insurance Offer and Coverage
Records of credits and/or advance payments received from the Premium Tax Credit (if claiming)

 

Homeowner/Renter Info

Mortgage interest, real estate taxes (Form 1098)
Second mortgage interest paid (if you don’t rent that property or rent it only under specific conditions – check with us)
Sale of your home or other real estate (Form 1099-S)
Settlement statement for any real estate purchased or sold during the year
Moving expenses (only if in active military and then under certain conditions)
Reimbursements for moving
Personal property tax information
Rent paid during tax year

 

Financial Liabilities

Auto loans and leases if vehicle is used for business 
Student loan interest paid (Form 1098-E)
Early withdrawal penalties on retirement funds, certificates of deposit CDs (1099-INT), and other fixed-time deposits
Records of gambling losses (if you plan to itemize deductions – any questions about that, check with us) 

 

Expenses

Gifts to charity (again, if you itemize deductions)
Health insurance information (the Form 1095 series – don’t need it for your federal return anymore but it is good to have among your records)
Education expenses (tuition and fees)
Childcare expenses
Job-hunting expenses
Medical savings accounts information (1099-SA)
Adoption expenses’ records
Unreimbursed expenses related to work (few folks can take this deduction) 

 

Self-Employment (SE) Data

Records for estimated SE tax paid (probably quarterly) in 2023
SE retirement plan information (SIMPLE and SEP-IRAs, for instance)
Health insurance premium records
Receipts or documentation for business-related expenses, including rent/mortgage, utilities, equipment, and auto loans, and leases if you use the vehicle for business
Farm income records 

 

Deduction documents

Retirement plan(s) contributions
Medical expenses (you can deduct only the amount of your medical and dental expenses exceeding 7.5% of your entire adjusted gross income) 
Tuition and higher-ed. (you may be eligible for one of a few education credits)
 

An important thing to understand is that we will guide you through the process and that even with all the changes that happen year after year, we’re on top of those changes and are working on each of our Jackson County client’s behalf, including you. 

 

We’re here to help.

 

Mike Mead, EA, CTC

 

We all have assumptions. It's what we do with them that matters. That includes your assumptions about taxes and finances.

Are any of these assumptions floating through your mind?

"Retirement planning can wait, right?"

"All debt is bad."

"Tax deductions and credits aren't worth the effort."

"Investing is for the rich."

"Saving is enough. No need to invest."

You'll want to dispel some of these assumptions and get a healthier perspective because it could make a difference in your life.

So, educate yourself -- change your narrative around money, taxes, and investing. Capitalize on the financial tools and software out there to help you succeed. And get support from a professional who can help you see things more clearly.

"I have a quick question. Can you help me?"

 

It's the time of year when I get messages from self-preparers who say:  "I have a quick question.  Can you help me?"

Remember, a quick question is, "Is social security taxable?"

That's what I consider a quick question, but sadly, most quick questions are never simple questions.

For most tax questions, the answer is: "It depends."  Everything in tax hinges on the answer(s) to something else.

Is social security taxable? It depends.

Is social security taxable to the state? It depends on if it's taxable, to begin with, and on your state of residence. 

There may be quick tax questions, but there are no simple ones.  

I mulled it over, trying to think up a simple tax question, and I couldn't think of one.  Even the question "Is interest taxable?" has no simple answer.

Yes, it is.... but it also depends on other things. 

Taxes are a tremendously convoluted, complicated puzzle.   If you like puzzles, it's fun.  

I like puzzles. 

 

Mike Mead, EA, CTC

Alliance Financial & Income Tax

info@afitonline.com

816-220-2001

Schedule an appointment today.