Welcome back to Part Eight and final of our “Back to Basics” series … we hope you’ve enjoyed the First Seven which started with all about “The Emergency Fund” in Part 1 … Part 2 being “Protection Planning” and Part 3 discussing All about Debt Planning or “The Good the Bad and the Ugly of Debt”, Part 4 Retirement Planning … Part Five, Back to Basics Education Planning, Part Six, Estate Planning Made Easy , Part Seven KISS Investing and now, with no further ado Tax Planning !
Tax Planning – The Key is the Planning
Welcome to the final part, for now, of our back to basics fun high-level financial planning series, we close this initial series out with Tax Planning!
In keeping with our high-level, most important, basics theme… in this special tax planning article, while we know there are tons of allegedly crafty techniques, sometimes we would call them gray, we want to stick with the basics of blocking and tackling as you can REALLY save a ton staying in the lanes, but just paying extra attention here and there….
So here we go:
Coincidentally, the most important part of Tax Planning is the second word in the subject, Planning!
As we individual or corporate tax payers traverse the tax year, it’s important to take note of unusual events that may be occurring. We’re certainly not saying you have to worry about this every minute of the day, but should you have an unusual increase in income, or decrease in income, this should be thought about before the end of the year for your tax planning.
Higher or Lower Income Years
As an example, a sudden increase in income may garner heavier donations, absolute confirmation of maxing out all pre-tax retirement vehicles, double checking your withholdings compared to prior years in what you may have owed or received as a refund, just to name a few.
On the inevitable lower income years you may want to do just the opposite, think twice about making donations, double check your withholdings to see if they are too high, we would certainly like you to max out all pretax retirement vehicles if possible, but not at the expense of our emergency funds as mentioned in prior episodes of the series.
The Actual Return – Scan that dude before signing and Filing
Always take a moment to scan your final return before filing it. Or if you’re using a tax professional or tax software, it’s always a good idea to review, once again the basic blocking and tackling on your actual tax return before filing.
Things that you want to make sure are correctly included on your tax return:
Income:
All income from all sources, this sounds simple but it’s super easy to miss especially in a job change year or retirement year. The IRS easily picks this up in the form of a paper audit due to a miss match of income. This includes proceeds from any type of sales, such a stock or other capital gains or any other income receiving asset.
Don’t Miss that Basis – Most all assets have them and the IRS does not
With regards to the prior points, double check that the basis has been entered on anything you may be paying capital gains. In certain instances there are no basis, but most of the time there is a basis on any capital asset that you may have, and if you forget to put it on your tax return the IRS has absolutely no way of knowing that you have a basis in it and therefore you will be paying unnecessary taxes that you otherwise would not.
Confirm You have Credit for Withholdings- Delayed Refunds
Lastly, with regards to the return, reconcile your withholdings from all sources and make sure that your return has all of the withholdings that you may have already sent the IRS. Unlike the prior subject, the IRS will notice a mismatch and eventually give you credit, but there could be months if not years of delays.
Don’t Ignore a Notice – The don’t usually bite
If you ever do receive a notice from the IRS, while it seems obvious, do not ignore it. If you ignore an IRS notice you are basically accepting their argument. If you notice it is correct pay it .. if not send a response. Over the decades of working with the IRS, we have found them to be very friendly and with good responses …usually very accommodating.
All right, there you have it the most important part of tax planning, is just that, planning in advance or maybe along the way. With a little foresight and a mild top of focus throughout the year, we feel certain you can Keep those taxes to a minimum…
Stay Tuned Here for Updates
Oh, one last thought, as long as you are receiving our regular posts here at Street-Cents, we constantly attempt to update everyone on actual, not probable or not maybe legislated, but actual tax law changes… so be sure to read our triple weekly posts…
That’s a Wrap for Now!
There you have it…. A complete Back to Basics from the ground up Financial Planning Review like Course….
Hope you enjoyed!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
July 2022 Financial Planning and Capital Market Review – Back to Basics Tax Return PLANNING – Legacy Health Coverage – Feds Pickle – Yield Curve Inverts – By John Kvale CFA, CFP
Hello and Welcome to our July 2022 … Financial Planning and Capital Market Update!
If you are too busy to read, feel free to listen as we describe our post and thoughts in friendly podcast audio format as well as Video!
Newbies –
We like to articulate our thoughts and review on a Monthly basis our Financial Planning Tips, Capital Markets thoughts and current events!
Hope you enjoy!
July 2022 Video
YouTube
Financial Planning Tip(s)
Back to Basics Series – Income Tax PLANNING
In our final fun “Back to Basics” review we discuss Tax PLANNING….
From the post:
Coincidentally, the most important part of Tax Planning is the second word in the subject, Planning!
As we individual or corporate tax payers traverse the tax year, it’s important to take note of unusual events that may be occurring. We’re certainly not saying you have to worry about this every minute of the day, but should you have an unusual increase in income, or decrease in income, this should be thought about before the end of the year for your tax planning.
Later in the post we discuss the key items in reviewing your return as well….. in step by step format!
Legacy Health Coverages
After running into several situations of legacy health care options for long time former employees… Here in this post we outline the possibilities of bridge Health Coverage from legacy companies and how fantastic of an option this can be…
In almost every situation, the key is these plans are not easily discovered. In order to find out if you have an option, it’s best to dig out contact information from HR of your old employer and reach out to them directly.
This is an expense to your former employer, so it would be expected not to receive multiple information regarding such a plan, but if available it could greatly help in bridging the gap for Medicare should we be in the situation of needing coverage before age 65.
Capital Market Comments
Bond Market turns Upside Down – The R Word
After the second negative GDP print … see next note of Fed’s Pickle…. the bond market really began to price in the R Word…. Here in this post we discuss the inversion of long bonds to short and their meaning…
The Fed’s Pickle
In this post, BEFORE the actual GDP announcement, we discussed the Fed’s pickle, with a hot economy (CPI inflation holding tight) BUT an economy that is slowing …..even qualifying as the R Word now – Recession!
From the BLS release after our post :
Real gross domestic product (GDP) decreased at an annual rate of 0.9 percent in the second quarter of 2022, following a decrease of 1.6 percent in the first quarter. The smaller decrease in the second quarter primarily reflected an upturn in exports and a smaller decrease in federal government spending.
The definition of recession is negative two quarters GDP….
Have a Great Day, Talk to You at the End of August!
John A. Kvale CFA, CFP
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Tagged Back to Basics, BLS, FOMC, Interest Rates, R Word