Watch his short video about individual tax highlights that will affect your 2018 tax returns. Questions? Give us a call at 816-220-2001

Home Sweet Home

The IRS does NOT want to take your house from you.

That's right: it's actually not very easy for the IRS to seize personal property or your house. Property seizure is the last step in a long process in which all other alternatives have been exhausted.

A professional in your corner can help you settle BEFORE you reach that point. Allow us to help you, or help your friends. We're in your corner.  Learn more here

Back To School

School will soon be back in session soon for many of our clients’ families, and for those in private schools, that means tuition bills. Your tuition payments may not be directly tax-deductible, but did you know that under the new tax code, you CAN pay those costs out of 529 plans, which carry their own options for tax deductions and/or tax-free payments? It’s simple tricks like this that can lower your tax bill. We’ve outlined a few more of those secrets in our free eBook, available here.

9 Simple Easily-Overlooked Tax Secrets

If someone handed you a book about how to save money on your taxes and avoid IRS audits, you might imagine it would be the size of an encyclopedia. This may surprise you, but we’re offering a short, easy-to-read eBook about just that. Gone are the days of taxes proving to be unendingly frustrating; a local professional with the right expertise makes all the difference. 

Take a look at our FREE report, and let us know how we can help. We’re ready and waiting.

What should you be shooting for?

It's helpful to have a financial target at which to aim. But the problem is that there is just SO MUCH financial advice to be had on ye olde World Wide Web that cutting through the noise and finding simple targets is difficult.

So, that's what I'm here to provide today.

For those of my clients who are over age 50, this can be a guide to catching up ... or, well, it might be the perfect thing to send along to a friend of yours who is in their 40s who might be interested in a great tax professional. ;) [Referrals really are the lifeblood of our practice.]

And as the nation's eyes are on the Northern California fires, let's not forget that no matter where you might find yourself on the financial scale, there are ALWAYS things for which to be thankful. Recognizing this fact is the first step towards financial well-being, no matter your age.

Mike Mead's 
"Real World" Personal Strategy Note
Attainable Financial Targets by Age 50
"Change might not be fast and it isn't always easy. But with time and effort, almost any habit can be reshaped." - Charles Duhigg

Finances should be viewed as dispassionately as possible, don't you think?

Unfortunately, too many financial planners have their advice clouded by various financial incentives, and they often don't take a holistic view of every part of the financial picture.

As a tax professional, I get unique insight into financial health because I see so many tax returns ... and because I am not burdened with as many competing incentives.

So, that being the case, allow me to establish some landmarks for you on our map towards financial independence. It's great to know where you should be headed ... or, from what place you should be coming.

Here are five real-world financial targets to shoot for by age 50:

1) Your estate plan should be fully in place.

Of course, various assets are handled differently. This is the time to make a complete review of how your plan is put together, to ensure that EVERY asset (not just the tangible ones) are still handled properly.

Intangible assets can include such things as what you are passing down to your children in terms of "family ways" and values that you would like to see spreading down throughout your generations. This is an important step at midlife.

2) If college is paid for, consider dropping term insurance. 

At this stage of life, it becomes more costly to pay for this service. You are probably at the point where your children are nearing the completion of their education. 

Remember that you purchased "peace of mind" (term insurance is not an investment) so that if anything were to happen to you, your home and your children's education could be paid for. If those things are now moot, it may be time to reassess.

3) Evaluate where you are with your saving and investing.

You may not want to retire for quite some time yet. That's a wonderful place to be. But you should be considering whether you have saved up enough to match your desired lifestyle spending. It's a good rule of thumb that you should have saved about 8-10 times your annual lifestyle spending at this point.

If you haven't?

4) Catch up on your savings.

At age 50, the maximum savings limit in a 401(k) or 403(b) account increases from $18,500 (which is the 2018 limit under age 50) to $24,500 (it was $500 less for each amount in 2017). At age 50 or older, Roth contributions also increase from $5,500 a year to $6,500 with these "catch-up" provisions. If we don't have eight times our lifestyle spending saved, now is the time to press these limits.

Of course, saving well is half the battle; investing well is the other half.

That's a subject for another day.

5) Lastly, begin considering what you really want out of retirement.

Consider that living a life of purpose doesn't necessarily mean decades of simple recreation.

Reaching the place where you don't "have" to work is a wonderful marker of true financial success. But you can make the decision to view your retirement years as an opportunity to do new, meaningful work. Commit yourself to a nonprofit or a ministry endeavor. Find ways to strategically invest your time and energy into different work that matters (aside from your first-half career).

Although you can have that attitude at any age, it is especially powerful when redefining the second half of your life.

I do hope this helps,  and no matter where you find yourself, there is "no shame in our game", and we are in your corner.

Until next week, 

 
Mike Mead, EA, CTC
Alliance Financial & Income Tax
807 NW Vesper Street
Blue Springs, MO. 64015
P - 816-220-2001 x201
F - 816-220-2012
www.afitonline.com

"AGE 55 RULE" FOR TAKING MONEY OUT OF A COMPANY RETIREMENT PLAN

If you participate in a company retirement plan, such as a 401(k), there's a way you can take a distribution and get out of paying the 10% early distribution penalty if you're under age 59 ½ at the time of the withdrawal. The rule is sometimes called the “age 55 rule.”

If you are 55 years old or older in the year you left your job and you need to take a distribution of your retirement plan funds immediately, you should leave the money in your company plan and take your withdrawals from there. The reason is because distributions from your company plan, when you leave the company in the year you turn age 55 or later, are not subject to the 10% early distribution penalty if you no longer work for that company (or what the tax code refers to as “separation from service”). Remember, though, that the distribution would still be subject to federal income taxes. 

It’s the year you turn age 55 that matters. For example, in one Tax Court case, the Court ruled that a person was liable for the 10% penalty for an early distribution made from her company retirement plan. Although her distribution took place after she turned age 55, she left her job when she was just age 53, which disqualified her from being eligible for the age 55 exception to the 10% penalty. It’s the year someone separates from service that matters, not the distribution date. To qualify for the penalty exception, separation from service must occur in the year the person turns age 55 or older.

Also, if you roll over company retirement plan money to an IRA, withdrawals before age 59 ½ are subject to the 10% early withdrawal penalty unless one of the other exceptions applies (such as disability). The age 55 exception does not apply to IRA distributions. So, if you meet the age 55 rule and need to spend some of your retirement money, don’t roll over the amount you need to an IRA. If you do, and then take a distribution from your IRA, you will be hit with the 10% penalty. Once you roll over company plan money to an IRA, the IRA rules kick in and you can’t go back and use the age 55 rule.

If you have questions regarding the Age 55 Rule contact the Blue Springs financial services firm of Alliance Financial & Income Tax today at 816-220-2001

Filing an Amended Return

What should you do if you already filed your federal tax return and then discover a mistake? First of all, don't worry. In most cases, all you have to do is file an amended tax return. But before you do that, here is what you should be aware of when filing an amended tax return.

Taxpayers should use Form 1040X, Amended U.S. Individual Income Tax Return, to file an amended (corrected) tax return.

An amended return cannot be e-filed. You must file the corrected tax return on paper. If you need to file another schedule or form, don't forget to attach it to the amended return.

An amended tax return should only be filed to correct errors or make changes to your original tax return. For example, you should amend your return if you need to change your filing status or correct your income, deductions or credits.

You normally do not need to file an amended return to correct math errors because the IRS automatically makes those changes for you. Also, do not file an amended return because you forgot to attach tax forms, 

such as W-2s or schedules. The IRS normally will mail you a request asking for those.

If you are amending more than one tax return, prepare a separate 1040X for each return and mail them to the IRS in separate envelopes. Note the tax year of the return you are amending at the top of Form 1040X. You will find the appropriate IRS address to mail your return to in the Form 1040X instructions.

If you are filing an amended tax return to claim an additional refund, wait until you have received your original tax refund before filing Form 1040X. Amended returns take up to 16 weeks to process. You may cash your original refund check while waiting for the additional refund.

If you owe additional taxes file Form 1040X and pay the tax as soon as possible to minimize interest and penalties. You can use IRS Direct Pay to pay your tax directly from your checking or savings account.

Generally, you must file Form 1040X within three years from the date you filed your original tax return or within two years of the date you paid the tax, whichever is later. For example, the last day for most people to file a 2014 claim for a refund is April 17, 2018. Special rules may apply to certain claims. Please call the office if you would like more information about this topic.

You can track the status of your amended tax return for the current year three weeks after you file. You can also check the status of amended returns for up to three prior years. To use the "Where's My Amended Return" tool on the IRS website, just enter your taxpayer identification number (usually your Social Security number), date of birth and zip code. If you have filed amended returns for more than one year, you can select each year individually to check the status of each.

Don't hesitate to call if you need assistance filing an amended return or have any questions about Form 1040X.