Category Archives: Tax Related

Confusing Tax Form 5498 Explained

Just when we all finally think it is safe to get out of the tax waters (Jaws reference haha) our good old friend, Form 5498, arrives in the mailbox.

What is Form 5498?2017 F 5498

This form reconciles qualified deposits.

Examples include:

  • Confirmation of 401k rollovers
  • Confirmation of IRA contributions
  • Proof of Simplified Employer Pension (SEP) plans contributions

Why does this form come in May? 

Since this form reconciles rollovers and also proves deposits, this form comes AFTER tax season. This form proves the amount contributed IN THE YEAR is was made, said another way, if we make a SEP deposit in the current year for the prior year, Form 5498 shows the deposit in the year it was made and the IRS knows there may be a delay.

What do I do with this form?

Keep it and file it with your next years (current tax year) information. It will correctly reconcile your IRA/401k transactions.

Have a great “Less Taxing Day”!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.

April 2017 Podcast Video, Financial Planning Tax Review and Earnings Update- By John Kvale

Whew, that was easy…. tax season is finally mostly over ….

We wanted to look back one last time on our personal taxes before we sunset those tax strategies for the high point of the season….

As a reminder,  we started with an Audio Podcast format for those that are unable to SEE the video or just prefer to listen to the audio… this makes the review slightly longer, but more descriptive.


April 2017 Video


Financial Planning Tip(s)-

AMT Tax Reminder

We ran across a lot of AMT or Alternative Minimum Taxes this season

Here are the key thoughts from our detailed post on AMT earlier this month-

  • Incomes between $170k and $313k joint and singles over $100k – you are in the cross hairs of AMT
  • Deferring income may be useful
  • Accelerate income

There is not a lot of planning changes with AMT, but in this case knowledge may be power!

Possible MAJOR tax reform

Late in the month an overview of major tax reform was released.

Here is a link from the White House

Here is a link from Barron’s that does a pretty good analysis

Here is our article on the possibilities earlier this month

What to do if you overfund your 401k/retirement plan

In our overfunding 401k post here, we discuss how your 401k/retirement plan can get overfunded….. here are the main points

  • Refund the extra amount ASAP
  • Apply the extra to the new year
  • If its a super small amount, its not the end of the world

Capital Market Comments

First Double Digit Earnings growth since 2011 expected

From our friends at Factset, who do a terrific job of outlining historic and future earnings.

Earnings are the ultimate driver of capital markets!

4-27-17 SP earnings estimates - Factset

What is nice about these estimates are that historically companies have been beating the street estimates … if this continues, the actual earnings may be even better double digit growth…. time will tell and we will be watching!

Hello May!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.,

High points of the Tax Reform Announcement due out today… Our favorite and least favorite

So we finally get through Tax Season, sunset the tax discussions until next year, and along comes an announcement that tax reform plans are due out today.

Keep in mind, no one knows for sure what the final outcome will be even after today’s announcements as approval and compromises will ensue.

Here are the high points from our perch.

Standard Deduction AdjustmentUncle Sam

An announcement for a large increase in the standard deduction is expected. If passed the net result could be tax savings for many especially those that do not itemize. In our view, this change, if approved would likely have the largest total number of filing changes. Needless to say the tax planning possibilities are huge….

Corporate Tax Changes

There is much anticipation of lowered corporate rates. US corporate tax rates according to many , are too high, a proposal for relief from higher corporate tax rates is expected.

There is also a possibility of smaller, flow through entity corporation, think S corporation income i.e. K-1 tax rate relief.

Tax Repatriation

Our favorite, and hopeful agreed upon, tax change would allow stranded income, already taxed in a foreign country, to move more freely back to the US with less tax burden.  International corporations would have greater access to foreign country stranded capital if this were to be approved.

We have heard less of this lately and hope it does not hit the cutting room floor!

Estate Tax Reform

There has been much talk of an Estate Tax reform as well. The gist is a disallowance of a step up in basis but a removal of the $5.49 million Estate tax rate.

If passed as mentioned, and the current tax laws held “as is” on capital gains, this could be a huge nightmare. We think there may be major compromises on this before actually passed. We will keep you posted on this as it develops. This is our least favorite possible reform at this point.

Have a Great “Tax Reform Announcement” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.

What to do if you overfund your 401k/Retirement Plan and how to prevent it from happening!

Maximizing your 401k or other similar retirement plan is one of our favorite tax saving ideas. We recommend all do this mostly throughout the year evenly.

In most situations the plan administrator watches the funding levels and stops our contributions when they hit the maximum Federal allowed tax deferred level. There are a few situations that can allow for an overfunding of your plan.4911abd2-4b9c-408a-a953-d805a2ea9c1a-9907-0000085a4bc97ada_tmp

Change of Jobs

It makes sense, we change jobs and the new sponsor has no idea wha the old sponsored plan allowed us to defer. In this case, be sure to keep your last paycheck from your old employer, which we HIGHLY recommend anyway, and track your contributions.

Merging or splitting of your Company

If your company splits or merges with another company, it is highly likely the new plan will not have visual of your old contributions. Once again, keep your last paycheck from the old company and track your new company contributions.

Changing of Administrators

This is a less likely overfunding option, but occasionally, it does happen. Once again, keeping your last paycheck from the old sponsor and tracking your total contributions is a good idea.

Overfunded, Now What?

Accidents do happen  and this is not the end of the world. We would recommend you work with your current employer/administrator to apply the possible following fixes.

  1. Refund the extra funds- Watch your w-2 carefully as this can cause inconsistencies- Keep a year end copy of your last paycheck is a must on this!
  2. Apply the extra funds to the following year- Not always available – Can be the easiest if administrator has sophisticated systems.

Double Tax

If for some reason you are not able to reverse the over contribution, you will be double taxed. Your overcontribution will be taxed as income and then you will be taxed when the funds are distributed, leading to a double tax. Not the end of the world for a small amount, but larger amounts wil be cumbersome.

In closing, keeping a final paycheck in any type of change is recommended, especially in the examples we mention, along with a comparison of your W-2 will help prevent many of these and other problems.

Have a “Less Taxing” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.

Taxes are Done… Finally … A Few Tips to Remember Before Sticking that Information Back into the Files

After each tax season we always feel relieved, as the pressure builds slowly but surely, much like the frog in the boiling water. This story has a better ending.

Taxes are done!

Here are a few tips that are hot of the presses and good reminders for NEXT years taxes!

HSA’s are Great, as is all pre-tax medical savings plansUncle Sam

If you can do an HSA, do one. If you are not sure, reach out to your employer and find out if you qualify, they will know in very short order. Don’t worry about using all of your HSA during the year, you will eventually need the funds for medical expenses.

We prefer HSA to the FSA’s or other plans that may expire annually. However, all pre-tax plans for medical expenses are great. When using the FSA or other “use it or lose it” type of plan, just make sure you do use it and do not let those hard earned dollars expire as the calendar turns to a new year.

Max that 401k

Now is a great time to make sure you are maxing your retirement plan. Do it evenly if possible! In a perfect scenario you likely want to run out of contributions in late November or early December. There are situations such as retirement, job change or other that may make it more appealing to fund early.

Do not overfund your 401k. This can be done via a job change or plan change. We have a more comprehensive article coming soon, but be reminded we do not want to over fund our 401k plans.

New plans can be aggressively invested. As the amount grows, the portfolio should be slowed down and be better diversified for the long term.

You Owed a bunch

If you owed a large amount of money and this is occurring repeatedly, it may be time to adjust your exemptions on for your employers W-4 records of your personal exemptions. Determine what your exemptions are currently and make an adjustment down in number. After your next paycheck, extrapolate the adjustment and see if that will cover your liability. Reach out to us if you need help!

Extension Filers

If you filed and extension, keep your feet moving, especially if you had large transactions or other items that may throw you into an “owed” mode. The longer you wait the more the penalties will be if you are caught by surprise.

Relax and enjoy the rest of the week and the full speed ahead into Summer !

You deserve it!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.

How to file an automatic personal 1040 Tax Extension … 40 Million returns yet to be filed

The IRS estimates that over 40 million tax filings are yet to be filed, which are due tomorrow.

You are not alone if April 18, 2017 was not enough time to file your taxes!

How to file an automatic Extension

In order to file and receive your automatically accepted 1040 Personal income tax extension, use Form 4868. Here is the IRS website with complete instructions.

Your new extended deadline for this year will now be October 16, 2017 for your personal 1040 returns. Other entity tax return extensions may have different deadlines.

Be sure to note the different addresses for filing, depending on your State of residence and with or without payment.

If you might owe, make an estimate NOW!Uncle Sam

If you owe taxes or think you may owe taxes, send in an estimate with your Form 4868 filing as interest penalties compound and accelerate after tomorrows deadline.

From the IRS:

The late payment penalty is usually ½ of 1% of any tax (other than estimated tax) not paid by April 18, 2017. It is charged for each month or part of a month the tax is unpaid. The maximum penalty is 25%.

Calculate your amount owed and be sure to send it with your extension request.

Our favorite Tax Estimate Calculator

Here is our favorite easy, high level tax calculator, just in case you are not sure on your possible liability. Five minutes of data entry will most likely get you close, Round up and mail that check in with Form 4868 to insure that you will not have penalties and interest accruing.

There are certainly other calculators, but if you are in a hurry and have not entered any information elsewhere, the Dinkytown estimator above may be just the ticket.

Don’t let October get here too fast…another extension is not this easy!

Have a Great “Pre-Tax Day” day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.


AMT aka Alternative Minimum Tax … History and Tactics

AMT better known as Alternative Minimum Tax has reared it’s ugly head more frequently than in years past. Given it’s pesky recurring appearances we wanted to explain just what this tax is and a few tactics to possibly lessen its tax teeth.

What is AMT?

Formed from a fury protest of a treasury secretary who noticed high income earners in the late 1960’s not paying any taxes.

Originally known as a “Minimum Tax” passed by legislators in 1969 and enacted in 1970, the original goal was to catch those with huge write-offs that appeared by lawmakers to be abusing the system.

AMT is a secondary tax established for tax payers with higher income, that for one reason or another were paying no income taxes.

This from the IRS, may best sum it up:

“Under the tax law, certain tax benefits can significantly reduce a taxpayer’s regular tax amount. The alternative minimum tax (AMT) applies to taxpayers with high economic income by setting a limit on those benefits. It helps to ensure that those taxpayers pay at least a minimum amount of tax.”

Why am I getting hit with AMT?Uncle Sam

The most likely reason is your income is right in the sweet spot for AMT and you have significant deductions.

If your joint income is between $170k and $313k (Single just over $100k), you are square in the cross hairs of AMT.  Being outside of these ranges under certain circumstances may not provide you protection from AMT taxes.

If you have income in the cross hairs and you have significant deductions, you are likely paying AMT!

What can I do about AMT?

If your income is between the above mentioned parameters, and there is nothing  you can do to adjust your income, then it may be a good idea to defer some of your deductions if you can, into a different tax year.

Look to put off items that may create further AMT,  un-reimbursed business expenses, or other possible delayed write offs may be better utilized in a different tax year, may help.

If you see your income falling in this range, deferring income or aggregating income may be a possibility. While we rarely invite extra income, this may be the one time it makes sense to do so. Raising your income my help your AMT liability.

In a world of knowledge is power, we understand that there may not be a lot you can do about AMT taxes, however the surprise may not be as great and minimization may occur with the above information in mind!

Have a Great Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.