WHAT WILL HAPPEN When Social Security Runs Out? At the end of August 2021, a new report was released that showed Social Security is projected to run out of money in 2033, one year earlier than previous calculations. With that deadline only 12 years away it is likely to impact everyone who is not already enrolled in Social Security as well as many who are. What will happen when the fund runs out? You may have heard that benefits will stop being paid once the fund runs out, but that is not likely to happen. We have laid out some of the changes that are likely to be made to Social Security over the next 12 years or after the fund runs out around 2033. Reduced Benefits If no changes are made before the fund runs out, the most likely result will be a reduction in the benefits that are paid out. If the only funds available to Social Security in 2033 are the current wage taxes being paid in, the administration would still be able to pay around 75% of promised benefits. While a 25% reduction in benefits could significantly hurt the retirement plans of those who are relying on their Social Security benefits, it is far less damaging than the program being shut down entirely. With the potential for benefits to be reduced, some retirees may be tempted to apply for their benefits early to receive as much as they can before the fund runs out. However, if you start taking your benefits as soon as allowed, they will be reduced to 70% of your full-retirement age benefit. Comparing this to the 75% that could be received even after the fund runs out, you would still be hurting your retirement by applying early. Increased Wage Taxes To avoid benefit reductions, congress may vote to increase the Social Security taxes charged on employee wages. If the increase were put in place immediately, the employee portion of the tax would need to increase from 6.2% to 8%. This would represent an additional $900 in taxes paid annually for an employee making $50,000 per year. Another proposal in wage taxes that has become popular in recent years is an additional tax on high earners. Rather than increasing the social security tax of 6.2% on all payers, this would implement a new tax on wage income above $400,000 to help stabilize the social security fund. Increased Full Retirement Age Even if the fund does not run out, the full retirement age needed to receive your full Social Security benefit is likely to go up in the future as life expectancies increase. Since the Social Security program was first started the average life expectancy has increased 7 years and yet the full age retirement for Social Security has only increased 2 years. As the fund begins to run out, it is likely that the full retirement age will be raised even further, along with harsher benefit cuts for those who apply early. Summary While Social Security benefits are unlikely to be completely eliminated 12 years from now, there is a strong possibility that they will be reduced significantly if revenues are not increased in the next few years. To make sure that your retirement plan is secure, you should analyze your retirement income stream under the assumption that your Social Security benefits will be reduced and determine what changes need to be made if that happens. Schedule a Meeting to Learn More Failing to order your affairs to minimize your tax burden could cost you significant money - so don't wait to take action. If you have additional questions or need some planning help, please reach out to us.

Asset Location and Creating Tax-Free Retirement Income

With only a few weeks left in 2019, now is a great time to review your personal situation and consider any year-end adjustments to minimize your short and long-term tax liability. We have identified six year-end planning strategies you can use to minimize your tax burden. Maximize Your Retirement Account Contributions If you have a 401(k), 403(b) or 457 retirement account you can contribute up to $19,000 ($25,000 if you are over the age of 50) for 2019. Contributions to any of these plans must be made before January 1st to apply to 2019. You can also contribute up to $6000 ($7000 if you are over the age of 50) to a traditional or Roth IRA for 2019 depending on your income. Contributions to traditional or Roth IRAs can be made up until April 15th of next year and still be applied to your 2019 contributions. If you qualify for a Health Savings Account you should max out your contributions to the HSA before making further contributions to your other retirement accounts. This is because HSAs allow for a tax deduction for your contributions, tax-free growth of the assets in your account, and tax-free distributions when used for medical expenses. With significant medical expenses almost guaranteed later in life, an HSA combines the best of both traditional and Roth retirement accounts. For more on HSAs read “Six Myths About Health Savings Accounts ” Take Advantage of Tax-Free Capital Gains If your taxable income is below $39,375 ($78,750 if you file a joint return) then your long-term capital gains tax rate is 0%. If your taxable income is below these thresholds and you own stocks or other investments that have appreciated in value you can take advantage of this 0% tax rate to sell your investment without paying any federal income taxes. If the sale of your investment pushes your taxable income above the thresholds for the 0% bracket you will pay 15% on the amounts above the threshold but will not pay taxes on the amount up to the threshold. While capital gains below these income thresholds are tax-free, the proceeds from the sales will still increase your taxable income for the calculation of certain tax credits such as the premium tax credit for health insurance. If you are currently receiving the premium tax credit, selling your investments could reduce the amount of the credit that you qualify for. Set Up a Donor Advised Fund The Tax Cuts and Jobs Act doubled the standard deduction while also limiting or removing various itemized deductions. As a result of these changes a much greater percentage of taxpayers will be taking the standard deduction between now and 2025 when the tax cuts expire. This also means that meaningful charitable donations may have little impact on your tax return. This is because a much larger portion of your charitable deduction is being used to reach the standard deduction threshold before you can realize any tax savings. One way you can work around this new limitation is to set up a donor advised fund. With a donor advised fund you can make a large contribution to the fund in one year and then make donations out of the fund to your charities of choice over the course of several years. With a donor advised fund you get a tax deduction in the year you contribute to the fund, regardless of when the fund distributes money to a charity. For example, if you typically give $5,000 each year to your church you can instead contribute $15,000 now to a donor advised fund and then pay $5,000 out of the fund each year for the next 3 years and then refill the fund at the end of the 3rd year. By bunching your contributions into every 3rd year you can prevent the bulk of your charitable donations from being absorbed by the standard deduction threshold. Consider a Roth Conversion Contributing to a traditional IRA or 401(k) provides tax savings today by pushing the tax liability into your retirement years. This strategy can make sense when you are likely to be in a lower tax bracket in retirement. But with the Tax Cuts and Jobs Act, we are currently in one of the lowest tax environments our country has seen in decades. With that in mind there is no guarantee that you will be in a lower tax bracket at retirement. And with our national debt growing at an accelerating pace you could be in a higher tax bracket when you retire even if your income is lower than it is today. With higher tax rates likely in the future, you may want to consider converting some of your 401(k) or traditional IRA funds into a Roth IRA, paying taxes now in today's low tax environment in order to realize tax-free distributions later in retirement. You can convert your traditional IRA into a Roth IRA even if you are above the income limit to make a normal contribution to a Roth IRA. You will also not be subject to the 10% early withdrawal penalty you would otherwise face when taking early distributions from a traditional IRA. Take out Your Required Minimum Distributions Once you turn 70 ½ you are required to take a minimum amount out of your traditional IRA, 401(k) or other retirement account each year based on your age and the balance of the account. Roth IRAs are the sole exception to RMDs. The IRS provides a worksheet to calculate the amount of your Required Minimum Distributions . Failure to take out the RMDs will result in a 50% tax on the amount that was not taken out. In the year that you turn 70 ½ the deadline to take your RMDs is April 1 of the following year. Each year after that the deadline is December 31 of that year. If you are over the age of 70 ½ you should take the time to review your RMDs and make sure you have taken enough out to avoid these substantial penalties. Use Your RMDs to Make Your Charitable Donations Once you turn 70 ½ you can begin making charitable donations directly out of your traditional IRA. When you make a charitable donation directly from your IRA you will not pay any income taxes on the distribution. This will allow you to fully deduct your charitable donations even if you do not itemize your deductions. You can also use qualified charitable donations to satisfy your required minimum distributions. Summary December is a great time to review your financial situation and determine if there are any year-end adjustments you should make, as there should be very few income surprises between now and year-end. Taking the time to review your situation and applying some of the strategies we just shared could help you significantly reduce your short and long-term tax liabilities. YEAR-END TAX PLANNING STRATEGIES Read more articles Failing to order your affairs to minimize your tax burden could cost you significant money - so don't wait to take action. If you have additional questions or need some planning help, please reach out to us.

OCTOBER 2016 MONOTELO QUARTERLY WHAT IS THE BEST Business Structure for You? assets. Once you choose a corporate structure, it is not easy to switch to another, so it is important that you weigh all your options before deciding. LIMITED PARTNERSHIPS. If your business is structured as a limited partnership, then all the profits and losses of the company to distinguish between income earned as a salary, and income earned as profits of the corporation, allowing them to only pay payroll taxes on a portion of the income. The major downside to the C-corp is what is referred to as double taxation, where the profits of the company are taxed first at the corporate level, and then again at the personal level as they are passed through to the owners. S-CORPORATIONS. The main benefits to operating as an S-corporation, are that income is passed through the corporation without being taxed, and you can differentiate between salary and profits of the corporation. The S-corp provides the same benefits as the C-corp, without being subject to the double taxation of the C-corp. Another benefit to the S-corp over the C-corp is when an S-corp is sold, the proceeds are treated as capital gains, which have Once you choose a corporate structure, it is not easy to switch to another When you operate a business, it is very important how you decide to initially structure that business. While a sole proprietorship is the easiest business to start and operate, not only will you miss out on tax strategies to lower what you pay the government, but you could find yourself personally responsible for the debts of the company if the company takes a turn for the worse. To avoid this risk, you can structure your business as a limited liability company, a limited partnership, or a corporation. These structures protect you from the debts of the company, hence creditors can't go after your personal will flow through to the individual returns of the owners, meaning there is no income tax at the business level. In a limited partnership, only the owners who are actively involved in the management of the business are personally liable for the debts of the company. Owners who are only financially involved in the company are not personally liable. C-CORPORATIONS. This is the most common type of corporation, as there is no limit to the number of shareholders and it is easy to transfer ownership. One benefit of the C-Corporation is the ability of the managing owner LIMITED LIABILITY COMPANIES. Similar to an S-corp, an LLC provides the liability protection of a corporation, along with the pass-through nature of a partnership. An LLC, however, places no restrictions on the number of owners, the tradeoff being that all LLC members pay self-employment taxes on all income. LLC's also provide advantages upon dissolution as assets distributed to owners are not taxable until sold by the recipient. more favorable tax treatment than ordinary income, which is how proceeds from the sale of a C-corp are treated. While there are requirements to qualify as an S-corp, such as no more than 100 owners, they can provide significant tax advantages over the C-corp. July 2016 Save as PDF January 2017

How to Save for Your Child Education Year-end Review of Your Retirement Accounts Will VS Trust: Which is Right for You Beware of Hedge Fund Managers Bearing Gifts The Fallacy of the Formula Five Things That Every IRA Owner Should Know Roth vs Traditional IRA: Which One Is Right For You Six Myths About Health Savings Account RETIREMENT ARTICLES Avoid the Hidden Traps of Retirement Plan Loans 5 Things You Can Do Right Now to Help Improve Your Retirement Years Financial Planning & Long-Term Tax Reduction in Light of the Tax Cuts and Jobs Act Profiting From the Failure of Active Managers Overcoming Our Cognitive Biases Our Planning Process We are always researching for tax tips and strategies that our clients can implement to lower their tax liability and improve their financial position. See below for a few simple tips that can be applied to your individual situation. Avoiding the 10% Threshold for Medical Expenses

Monotelo Advisors Inc Tax Planning Engagement Letter Heading 1 Thank you for choosing Monotelo to assist you with your tax planning needs. Tax planning is a strategic approach to managing finances that aims to minimize tax liability and maximize savings. By organizing income, expenses, investments, and expenditures efficiently, individuals and businesses can take full advantage of tax benefits, deductions, and credits. Effective tax planning not only reduces the amount of taxes owed but also contributes to better financial health by freeing up resources for savings, investments, and future growth. This engagement letter outlines the scope of our services, your responsibilities, and our commitment to providing you with accurate and timely solutions. By agreeing to this letter, you authorize Monotelo to prepare a tax plan that will help to reduce your short-term and lifetime tax liability. We look forward to working with you to ensure that you retain more of your hard-earned money.

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TAX TALK In our articles we will frequently use tax-specific phrases that while second nature to us, may be confusing to many of our readers. To clear up some of that confusion we have provided some definitions for the most common phrases below. Adjusted Gross Income Adjusted Gross Income (AGI) is defined as gross income minus adjustments to income. Gross income includes your wages, dividends, capital gains, business income, retirement distributions as well as other income. Adjustments to Income include such items as Educator expenses, Student loan interest, Alimony payments or contributions to a retirement account. Many deductions and credits on your tax return are determined by your AGI. Tax Credits vs Tax Deductions There are two ways your tax burden can be reduced: Tax Credits which directly reduce your tax bill, and tax deductions which indirectly reduce your tax bill by lowering the amount of your taxable income. Let’s say you have taxable income of $10,000 which is taxed at 25%, your tax bill on that income is $2,500. If you receive a tax deduction of $1,000 it will bring your taxable income down to $9,000, reducing your tax bill to $2,250 and saving you $250. IF instead you have a tax credit of $1,000 it will directly reduce your $2,500 tax bill down to $1,500, saving you the full $1,000. Filing Status. Your filing status determines the deductions and credits you qualify for and how much tax you pay on your income. Depending on your situation, you may qualify for more than one filing status, in which case you can choose the one more beneficial to you. These are the five filing statuses: Single. This is the normal filing status for taxpayers who are not married or who are legally separated Married Filing Jointly . Taxpayers who are married can file a joint tax return, reporting all of their income and expenses together Married Filing Separately. Taxpayers who are married can instead choose to file separate tax returns, each reporting their own income and expenses. It is generally better to file a joint return to keep taxes low, but in rare circumstances it can be more beneficial to file separate. Head of Household. Taxpayers who are unmarried and provide more than half the cost of maintaining a home for themselves and at least one other qualifying person can file head of household. This filing status provides larger deductions and lower tax rates than filing single making it the best option for taxpayers who qualify. Qualifying Widow(er) with Dependent Child. Taxpayers whose spouse died within the last 2 years can choose this filing status if they have a dependent child. This status allows them to claim the same deductions and tax rates as if they were filing a joint tax return. Your filing status for any given year is determined by your marital status on the last day of the year. A couple who get married December 31st can file a joint return for that year even though they were unmarried for the majority of the year. This rule does not apply in the death of a spouse. When a spouse dies the surviving spouse can file a joint tax return for the year of death. Itemized Deductions vs Standard Deduction There are two ways you can take deductions on your tax return: you can itemize deductions or use the standard deduction. The standard deduction is a set amount and is based on your filing status. If you itemize your deductions you will take the actual amount you spent on allowable deductions which include: Mortgage interest paid on your personal residence State income taxes paid Real estate taxes paid on your personal residence Medical expenses paid including out-of-pocket premiums paid Charitable donations Each of these deductions is subject to various limitations. Since the passage of the Tax Cuts and Jobs Act in 2017, most taxpayers will benefit more from taking the standard deduction than from itemizing their deductions.

THE TAX IMPLICATIONS OF YOUR SIDE HUSTLE Many taxpayers have side gigs that have a significant impact on their taxable income. From Uber drivers, to carpenter contractors, to horse racing, to manufacturer reps, to part-time real estate agents, to organic beef farms… you name it, and we’ve probably seen it. And from a tax-compliance standpoint, there is an important distinction between hobbies and businesses that are operated with the intention of earning a profit. Understanding this distinction could save you thousands of dollars come April 15th. Hobby Loss Rules: If an activity is not intended to earn a profit, losses from that activity may not be used to offset other income. The ability to deduct losses on your tax return will ultimately be determined by the Internal Revenue Service. If the IRS determines that the taxpayer did not enter into the business activity with a profit motive or that the taxpayer continued losing money in an activity with no intention of ultimately making a profit, the taxpayer will lose the ability to deduct those losses. These rules apply to individuals, partnerships, estates, trusts, and S corporations. Hobby or For-Profit Business? When determining the real intent of the taxpayer’s activity, the Internal Revenue Services will look at a number of factors in assessing whether or not the activity is motivated by profit: whether the activity is conducted in a professional, businesslike manner the qualifications of the taxpayer or the taxpayer’s advisors the amount of time and effort spent by the taxpayer or the competency of the taxpayer’s agents and employees the potential for appreciation of the venture’s assets the taxpayer’s history in operating other businesses the taxpayer’s success or failure with the particular activity the ratio of profits to losses and how that compares to the taxpayer’s investment in the enterprise the financial status of the taxpayer, the economic benefit of the losses, and the taxpayer’s primary source of income the personal pleasure or recreation the taxpayer derives from the activity While the taxpayer must engage in the activity with a genuine profit motive, a “reasonable” expectation of profit is not required if the probability of loss is much higher than the probability of gain. The IRS will likely view all the facts and circumstances to make their decision, but more weight is given to objective facts than taxpayer statements. One simple way to get off the radar screen of the IRS is to show a profit. If the gross income from the activity exceeds deductions for three out of 5 years, the activity is presumed to be conducted for profit. Read more articles Failing to order your affairs to minimize your tax burden could cost you significant money - so don't wait to take action. If you have additional questions or need some planning help, please reach out to us.

2023-2024 Tax Brackets and Federal Income Tax Rates There are seven federal income tax brackets. Here's what they are, how they work and how they affect you. There are seven federal tax brackets for the 2023 tax year: 10%, 12%, 22%, 24%, 32%, 35% and 37%. Your bracket depends on your taxable income and filing status. These are the rates for taxes due in April 2023. Tax brackets and rates for the 2023 tax year, as well as for 2022 and previous years, are elsewhere on this page. 2023 Federal Income Tax Brackets (for taxes due in April 2022 or in October 2022 with an extension ) Single filers Married, filing jointly Married, filing separately Head of household 2022 Federal Income Tax Brackets (for taxes due in April 2023) Single filers Married, filing jointly Married, filing separately Head of household How tax brackets work The United States has a progressive tax system, meaning people with higher taxable incomes pay higher federal income tax rates. Being "in" a tax bracket doesn't mean you pay that federal income tax rate on everything you make. The progressive tax system means that people with higher taxable incomes are subject to higher federal income tax rates, and people with lower taxable incomes are subject to lower federal income tax rates. The government decides how much tax you owe by dividing your taxable income into chunks — also known as tax brackets — and each chunk gets taxed at the corresponding tax rate. The beauty of this is that no matter which bracket you’re in, you won’t pay that tax rate on your entire income. The percentage of your taxable income that you pay in taxes is called your effective tax rate. To determine effective tax rate, divide your total tax owed (line 16) on Form 1040 by your total taxable income (line 15). Example #1: Let’s say you’re a single filer with $32,000 in taxable income. That puts you in the 12% tax bracket in 2021. But do you pay 12% on all $32,000? No. Actually, you pay only 10% on the first $9,950; you pay 12% on the rest. (Look at the tax brackets above to see the breakout.) Example #2: If you had $50,000 of taxable income, you’d pay 10% on that first $9,950 and 12% on the chunk of income between $9,951 and $40,525. And then you’d pay 22% on the rest because some of your $50,000 of taxable income falls into the 22% tax bracket. The total bill would be about $6,800 — about 14% of your taxable income, even though you're in the 22% bracket. That 14% is your effective tax rate. That's the deal only for federal income taxes. Your state might have different brackets, a flat income tax or no income tax at all. What is a marginal tax rate? The term "marginal tax rate" refers to the tax rate paid on your last dollar of taxable income. This typically equates to your highest tax bracket. For example, if you're a single filer with $30,000 of taxable income, you would be in the 12% tax bracket. If your taxable income went up by $1, you would pay 12% on that extra dollar too. If you had $41,000 of taxable income, however, most of it would still fall within the 12% bracket, but the last few hundred dollars would land in the 22% tax bracket. Your marginal tax rate would then be 22%. How to get into a lower tax bracket and pay a lower federal income tax rate Two common ways of reducing your tax bill are credits and deductions. Tax credits can reduce your tax bill on a dollar-for-dollar basis; they don't affect what bracket you're in. Tax deductions, on the other hand, reduce how much of your income is subject to taxes. Generally, deductions lower your taxable income by the percentage of your highest federal income tax bracket. So if you fall into the 22% tax bracket, a $1,000 deduction could save you $220. In other words: Take all the tax deductions you can claim — they can reduce your taxable income and could kick you to a lower bracket, which means you pay a lower tax rate. Failing to order your affairs to minimize your tax burden could cost you significant money - so don't wait to take action. If you have additional questions or need some planning help, please reach out to us.

TAX TIPS For Home Sellers As the housing recovery begins to pick up steam, some home sellers will have gains on the sale of their homes for the first time in nearly a decade. The good news is that the tax code recognizes the importance of home ownership by providing certain tax breaks when you sell your home. THE MOST IMPORTANT THING TO KNOW when selling your home is that your sale qualifies for an exclusion of $250,000 in gains ($500,000 if married filing jointly) if you owned the home and used it as your main home during 2 of the last 5 years before the sale and you have not claimed any exclusion for the sale of another home within the last 2 years. The 24 months of residence can fall anywhere within the 5-year period. It doesn't even have to be a single block of time. All you need is a total of 24 months (730 days) of residence during the 5-year period. POINTS/HOME IMPROVEMENTS/ MOVING & PROPERTY TAX DEDUCTIONS IF YOU HAVE TO SELL YOUR HOUSE because you're relocating for work, you might be able to deduct some of your moving expenses. Deductions could include transportation costs, travel to the new place, storage costs and lodging costs. YOU CAN DEDUCT YOUR PROPERTY TAXES for the portion of the year that you owned the home - up to the date of the sale. SOMETIMES YOU NEED TO IMPROVE YOUR HOME to get it sold. If you make home improvements that help sell your home, and if they are made within 90 days of the closing, they may be considered selling costs, which could be deductible. IF YOU PAID POINTS TO LOWER YOUR INTEREST RATE when you refinanced your home, you might qualify for an additional deduction. Because you can deduct a proportional share of the points until the loan is paid, when you pay off the loan through a sale,you can deduct the remaining value of those points. ADDITIONAL TIPS IF YOU DON'T QUALIFY for the Section 121 exclusion (left), you will owe taxes on any profit, so make sure you deduct all your selling costs from your gain. Some of the selling costs could include: Your real estate agent's commission Legal fees Title insurance Inspection fees Advertising costs Escrow fees Legal fees SELLING PRICE - SELLING EXPENSES CALCULATION AMOUNT REALIZED - ADJUSTED BASIS GAIN OR LOSS REPORTING REQUIREMENTS YOU NEED TO REPORT THE GAIN IF: 1 2 3 You have a taxable gain on your home sale and do not qualify to exclude the sale. You received Form 1099-S. If so, you must report the sale even if you have no taxable gain to report. You wish to report your gain as a taxable gain because you plan to sell another property that qualifies as a home within the next two years, and that property is likely to have a larger gain. Save as PDF Read more articles Share Failing to order your affairs to minimize your tax burden could cost you significant money - so don't wait to take action. If you have additional questions or need some planning help, please reach out to us.

What sets Monotelo Advisors apart is our unique focus on planning ahead to reduce your tax burden every year. File Online File online File your taxes online form your home. Upload your documents, and get started. Schedule a Meeting Schedule An Appointment Need additional tax help? Schedule an appointment to get started. Get your tax return started at Monotelo Step 1: Upload you documents, or schedule an appointment. Step 2: One of our experienced tax professionals will process your return, and maximize your refund. Step 3: Once your return is complete, we will contact you to sign the consent forms. Step 4: After signing the consent forms, you should receive your tax refund in 1-3 weeks. How the process works. Get started Have tax questions, or need more information? Schedule an appointment Give us a call One of our experienced tax experts would be happy to answer your questions, and get your tax return started The Multiplying Power of Generosity: Feed a Child This Thanksgiving As Thanksgiving approaches, many of us pause to reflect on what we’ve been given: family, health, opportunities, and the simple blessing of a full plate. At Monotelo Advisors, we believe gratitude is most powerful when it moves us to action. This season, we invite you to join us in turning thankfulness into hope for children who need it most. Why This Matters In Sub-Saharan Africa, countless families face an impossible choice every day: feed their children or pay for nec 7 Money-Smart Principles Every Parent Should Teach In today’s fast-paced, consumer-driven world, raising financially wise children is one of the greatest gifts a parent can give. Money... Student Loan Alert: Strategic Moves to Make as SAVE Ends Millions of federal student loan borrowers are facing a new financial reality as the SAVE (Saving on a Valuable Education) plan... Helpful tax tips and articles. View More Small Business Tax Services We will help you minimize your short-term and lifetime tax liability to free up the cashflow needed to help you grow your business and build for your future. Learn more Retirement Planning Our Values-Based planning service will build the road map so you can have confidence that all the pieces of the puzzle are working together for you to live your best life possible. Learn more More services from Monotelo