Quarterly: Oct 17 ...Better Decisions This article is the second part of our series on decision making. Applying some of the information from Thinking, Fast and Slow, we are diving into the research from Nobel Prize winner Daniel Kahneman and how he breaks down our decision-making process into two systems. Notes from Better Thinking... : To keep things simple Kahneman breaks down our thinking process into two systems that he describes as “System 1” and “System 2.” System 1 is intuitive and emotional, fast and easy. It is reactive. “There was a shark attack last week, I am never going to the beach again.” System 2 is deliberative and logical. It is also slow and requires effort. “What are the chances of getting attacked by a shark? Is swimming in the ocean more dangerous than swimming in a community pool?” The challenge with our System 1 and System 2 thinking is when we "think" we are an expert, or we have a life experience that impacts us. This perception of “expertise” or the impact of life experience can shape our decision-making process in a profound way. That’s because life experiences build the heuristics that we use as short-cuts to make System 1 decisions. Some of these heuristics are helpful, and some are not. If I were to ask you what is more probable: Dying in a train accident or getting struck by lightning?...Most people would say train accident. That’s because System 1 kicks in, pulls up memories of train accidents in the news and assumes that there is a higher probability of dying from a train accident than getting struck by lightning. This System 1 action is referred to as the availability or familiarity heuristic. But according to the National Center for Health Statistics, we have a higher chance of dying from a lightning strike than we do from a railway accident. According to that same study, Americans are two and a half times more likely to die from a bee sting than from a dog attack. Like bee stings, average market gains over long periods of time aren’t as headline grabbing as train crashes or market crashes, so they are not as prominent in our minds. Investors are quick to succumb to System 1 thinking when we avoid “riskier” asset classes, especially when we have the impact of the great recession burned into the back of our minds. By focusing all our attention on the potential for short-term fluctuations in performance, we ignore the fact that these “riskier” asset classes can be the ones that have the greatest long-term impact on portfolio growth. The familiarity heuristic may not only cause us to avoid high-performing asset classes, it can also work against us by biasing us toward things we are familiar with. According to JP Morgan, people living on the West Coast tend to overweight the technology sector, while people living in Texas tend to overweight energy; and people in the Midwest tend to overweight industrials. While it is wise to invest in asset classes where we have an edge, it is a statistical improbability that the entire universe of Texans has an edge in energy investments. And it’s equally improbable that the entire universe of Midwesterners has an edge in industrials. While System 1 might convince us all that we are “experts,” we can’t all have an edge. Not everyone is the “smartest person in the room.” The irony of the familiarity heuristic is that it can cause us to avoid “riskier” asset classes on one side and cause us to overweight our portfolio on the other side, ultimately creating more potential hazard from a lack of diversification and concentration risk. We are all swayed by our personal biases and deceptive thinking from time to time. The key to managing our thinking is to simply recognize that we are inclined to be biased. Rather than reacting to System 1 and our biases, we need to access System 2 and ask ourselves deeper questions. System 1 thinking looks at the high performing mutual fund and says “this fund has significantly outperformed my other mutual funds in the last two years. Let’s sell my underperforming funds and buy more of this fund.” System 2 thinking looks at the high performing mutual fund and asks: “Why is this fund outperforming? Did the manager tactically recognize the hot sectors? Or was it always invested in this sector, and this sector happened to outperform the last two years? How likely is it that this sector will continue to appreciate when it is extremely expensive today? Let’s sell half of this holding and move into something that has more potential to grow.” System 1 thinking looks at a marginal company in a stagnant industry and says: “Wow this company has not grown earnings in the last three years, there is no way I would own this stock.” System 2 thinking says: “This company has not grown earnings in the last three years, but the balance sheet is stronger today and the market cap is one-third of what it was three years ago. At the extremely depressed valuation, I’m willing to bet that this company will converge back to a more-normal valuation when investors begin to recognize the safer balance sheet.” Boiling it Down: System 1 can do a pretty good job of keeping us alive in the jungle, but may not serve us as well when seeking to maximize our long-term wealth. That’s where we need to recognize that we are inclined to be biased and our short-cutting heuristics may be hurting us. Tapping into the benefits of System 2’s slow thinking can help prevent us from making costly mistakes. Read Part Three: ".The Fallacy of the Formula"

What sets Monotelo Advisors apart is our unique focus on planning ahead to reduce your tax burden every year. Monotelo Advisors The main thing that separates Monotelo Advisors from most financial service firms is that we start each relationship by seeking to increase your cash flow by addressing your short and long-term tax liabilities. Our Planning Process Our five-step planning process is designed to help you create a financial plan with the optimal tax efficient strategies that help you meet your short and long-term goals. Read our thoughts on managing your wealth. Wealth Management Articles Learn More Beware of Hedge Fund Managers Bearing Gifts "Do not trust the horse, Trojans. Whatever it is, I fear the Greeks even when they bring gifts." Retirement Planning The Tax Cuts and Jobs Act has created a unique and time-sensitive retirement planning opportunity that will sunset in 2025.

Get Started Simplify Your Crypto Tax Filing – Expert Help for Crypto Investors Stay compliant with IRS guidelines while maximizing deductions for your cryptocurrency trades. Book a Free Consultation Expertise in Crypto Taxes Specialists in crypto tax regulations. Accurate Reporting Tools and expertise for tracking and reporting trades. Maximize Deductions Strategies to minimize tax liability. Problem 1 Struggling to track your trades across multiple exchanges? Solution We simplify the process by consolidating all your trading activity into a single, comprehensive report. Problem 2 Confused about tax regulations for staking and DeFi Solution Our experts provide clarity and ensure proper categorization to avoid mistakes Problem Cryptocurrency Tax Challenges Does your tax preparer handle activities like trading, staking, mining, airdrops, DeFi, and NFTs? Are you worried about staying compliant with evolving IRS cryptocurrency taxation guidelines? Are you missing out on deductions for mining equipment or operational costs? Do you struggle to calculate your basis for various positions? Solution Most tax software lacks the ability to robustly track cryptocurrency activities, leading to incomplete or incorrect filings, and increasing the risk of audits or penalties. Monotelo Advisors resolves these issues by: Offering advanced crypto-tax solutions tailored to trading, staking, mining, DeFi, and more Ensuring compliance with the latest IRS guidelines. Maximizing deductions, including those for operational costs and equipment Simplifying basis reporting to ensure precise and accurate tax preparation The Process Step 1 Request access to your secure portal. Sign Up Step 2 Upload Your Documents Upload all your tax documents easily and securely to your portal Step 3 We Prepare and Review Our team will prepare your return and ensure it’s accurate and compliant. If you trade on non-traditional platforms (other than Coinbase or Robinhood, etc.), please provide the transaction basis information. If we notice any missing information, we’ll follow up promptly. Step 4 Review and Approval Once your return is complete, we’ll notify you via text, email, or phone—your choice! You’ll have the option to review your return with one of our tax experts. Step 5 We Handle the Rest After your review, we’ll finalize and electronically file your tax return. Get Started Let's get started! First name Last name Email Phone Street Address City, State, Zip Code Submit Get Started Resources Crypto Tax Prep Checklist 5 Crypto Mistakes to Avoid Should I choose a CPA or an Enrolled Agent? Tax Prep Checklist The Mega Back-Door Roth – A Powerful Retirement Strategy Our Pricing Basic Starts at $350 up to 25 transactions Plus Starts at $425 up to 100 transactions Advanced Starts at $650 up to 1,000 transactions Contact for a quote Get Started Additional schedules from other sources of income or deductions may incur an additional fee. Don’t wait until the deadline – simplify your crypto taxes today! Start Your Crypto Tax Return Now © 2025 by Monotelo Inc. info@monotelo.com 800-961-0298 View our privacy policy

SMALL BUSINESS TIPS PANDEMIC PROVISION FOR TAX-FREE PAYMENTS TO YOUR EMPLOYEES During a federally declared disaster, such as the COVID-19 pandemic, the tax code allows you to make payments to your employees that are deductible by you, the employer, but not taxable to your employees. If your business is an S-Corporation then you qualify as an employee of the business eligible for these tax-free payments . This provision provides a great limited-time opportunity to pull money out of your business tax-free! These tax-free payments are a provision of Section 139 of the Internal Revenue Code which was passed following the September 11th terrorist attacks. How Does it Work? Normally, payments of cash to your employees are considered taxable income to them by the IRS unless it is to reimburse them for qualified business expenses. Under this provision for disaster relief payments you can reimburse your employees for personal expenses that are incurred because of the disaster as long as they are reasonable and necessary. For the COVID-19 pandemic this can include: Out-of-pocket medical costs not covered by health insurance Expenses for working from home such as a computer, office equipment, supplies & utilities Funeral costs for an employee or an employee’s family member Childcare costs so that your employees can continue to work while children are home from school These are the most common costs that could be reimbursed, but others may qualify for the same tax-free reimbursement if they are reasonable and incurred because of the pandemic. What Does not Qualify? You cannot use this provision as a substitute for your employee’s wages to provide them with tax-free income. In other words, do not reduce an employee’s wages by $1,000 and then reimburse them for a $1,000 medical expense. You can also not reimburse employees for lost wages, or as a form of unemployment compensation. What Should You Do? To take advantage of these tax-free disaster relief payments to your employees we recommend that you put together a written plan for payments that identifies: Starting and ending dates of the program A listing of the expenses you will pay or reimburse The maximum payment per employee A procedure for your employees to request reimbursement We would advise using a form similar to an employee expense report for your employees to request their disaster relief payments. To make things a bit easier, the IRS does not require that your employees provide documentation to support the expenses claimed as long as the amounts are reasonable. Summary With COVID-19 declared a federal disaster, you can take advantage of the disaster relief payment provision of the Internal Revenue Code to provide tax-free payments to your employees to cover their personal expenses that were incurred because of the pandemic. If your business is structured as an S-Corporation you as the owner are considered an employee and can reimburse your personal expenses with tax-free payments from the business. If you would like help determining what expenses are eligible for disaster relief payments or would like guidance on implementing this program for your employees please reach out to us.

Tax Efficient Retirement Planning

The tax deductions that are available to the average taxpayer have shifted over the years. What was available a few years ago may not be available today and what is available today may shift in the coming years. For taxpayers who itemize deductions, you can deduct the medical expenses you paid for yourself, your spouse or your dependents to the extent that they exceed 7.5% of your 2019 adjusted gross income (AGI). WHAT EXPENSES ARE DEDUCTIBLE IN 2019? For example – if you and your spouse’s combined income was $110,000 last year and you contributed $10,000 to your IRA, your AGI would be $100,000. You could deduct any medical expenses that exceed $7,500. But you could only deduct those medical expenses if you are itemizing (not taking the standard deduction). * Note- the threshold jumps from 7.5% to 10% in 2020. One of the changes under the recent Tax Cuts and Jobs Act is that you can no longer deduct miscellaneous employee business expenses. This change has a more-significant impact on union members, public servants and sales professionals who are not fully reimbursed for their travel, cell phone or entertainment expenses. For small business owners and independent contractors, your business expenses must be ordinary and necessary to be deductible. This means they must be common and accepted in your industry and they must be helpful and appropriate for your specific trade or business. Here is a more in-depth summary of what you can and cannot deduct on your 2019 tax return: Medical Expenses Deductible Preventative Care, Treatment, Surgeries, Dental and Vision Care: You can also deduct visits to psychiatrists, psychologists, prescription medication, glasses, contacts and hearing aids. Alcoholism Treatment: Amounts paid for inpatient treatment to a therapeutic alcohol addiction center are deductible. This includes meals and lodging provided by the center during treatment. Fertility Enhancement: The cost of the following infertility treatment procedures are deductible: In vitro fertilization, including temporary storage of eggs or sperm. Surgery, including an operation to reverse prior surgery that prevented you from having children. Guide Dog and Service Animals: The cost to purchase, train and maintain a guide dog or service animal to help a visually impaired, hearing disabled or physically disabled person are deductible. These expenses include food, grooming and veterinary care. Stop Smoking Programs are deductible, but the cost of non-prescription drugs is not deductible. Not Deductible Any Reimbursed Medical Expenses that were paid by your employer or insurance company are not deductible. Weight Loss Programs that focus on general health are not deductible. However, if the weight loss treatment is for a specific disease diagnosed by a doctor (obesity, heart disease, etc), the expense is deductible. Nonprescription Drugs and Medicine (except for insulin) are not deductible: Only prescription drugs are deductible. Health Club Dues: Any expenses paid to improve your general health that are not related to a medical condition are not deductible. Cosmetic Surgery: Any surgery that does not meaningfully promote the proper function of the body, prevent or treat an illness or disease is not deductible. You can, however, deduct cosmetic surgery if it is necessary to improve a deformity arising from a congenital abnormality, personal injury or disfiguring disease. Miscellaneous Deductions Deductible Gambling Losses to the Extent of Gambling Winnings: Gambling losses can include wagers, or other expenses incurred in connection with the gambling activity; but they are limited to the extent of the gambling winnings. In other words – you cannot take a net gambling loss, but you can use your losses to wipe out any gambling winnings. Casualty Losses: ”Generally, you may deduct casualty and theft losses relating to your home, household items, and vehicles on your federal income tax return if the loss is caused by a federally declared disaster declared by the President.” IRS Website Theft Losses – The amount of your theft loss is generally the adjusted basis of your property because the fair market value of your property immediately after the theft is considered to be zero. Losses from Ponzi-Type Investment Schemes: Deductible as theft losses from income-producing property. Home Office: You can take a home office deduction if you are self-employed and you use part of your home regularly and exclusively for business purposes. Club Dues: Club dues (as we state below) are not deductible. The following organizations, however, are not treated as clubs organized for business, pleasure, recreation or social purpose (unless one of the main purposes is for entertainment): Boards of trade Business leagues Chambers of commerce Civic or public service organizations Professional organizations Real estate boards Trade associations Not Deductible Unreimbursed Employee Expenses are no longer Deductible under the new tax code , unless you are a performing artist or serve in the Armed Forces as a reservist. Commuting Expenses: The cost of traveling from your home to your work is not deductible. There is an exception is for qualified performing artists and Armed Forces reservists. They can deduct the cost of hauling tools or instruments to and from work. Fines and Penalties: Any amounts paid to settle a liability for a fine, a civil or criminal penalty or a parking tickets are not deductible. Club Dues: Membership in any club organized for business, pleasure, recreation or social purpose is not deductible – this includes athletic, luncheon, sporting, airline, hotel and country clubs. Campaign Expenses: This applies to a candidate for any office and includes qualification and registration fees and legal fees. Lobbying Expenses and Political Contributions: According to the IRS: “You can’t deduct contributions made to a political candidate, a campaign committee, or a newsletter fund. Advertisements in convention bulletins and admissions to dinners or programs that benefit a political party or political candidate aren’t deductible.” Political Action Committees (PACs) are included in this list as well. 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.

A 529 college savings plan or a Roth IRA can help you realize tax-free earnings to fund your child's college education. Save as PDF Read more articles Share 1 2 HOW TO SAVE HOW TO SAVE FOR YOUR CHILD'S COLLEGE EDUCATION The cost of a college education is rising by three to four percent a year, so it is never too early to start saving for your child’s future college tuition. Before you start saving however, make sure to consider the options that will maximize your savings while minimizing your tax burden. 529 Plans A 529 plan allows you to contribute to a tax-advantaged account in order to fund college tuition. While contributions to a 529 plan do not provide a federal tax deduction, you may qualify for a deduction on your state tax return for your contributions. Additionally, you can pull out your contributions and earnings from the account tax free when you use them for qualified education expenses. Qualified education expenses include tuition, fees, books, supplies, and equipment required for enrollment. If your child is enrolled at least half-time (6 or more credit hours per semester), room and board are also considered to be qualified expenses. 529 plans come in two varieties: Prepaid tuition plans and college savings plans. Prepaid Tuition Plan With a prepaid tuition plan you can pay for your child’s tuition ahead of time, based on the current rates. For example, if your child is 8 and one year of qualifying college tuition is $10,000 today, you can contribute $10,000 to the fund today and your child’s first year of tuition will be fully covered when they start college in ten years - regardless of the cost of tuition at that time. You are not required to prepay a full year at once, you can pay into the fund over multiple years but each year the required amount will increase. With a prepaid tuition program, you do not need to worry about how well the fund is performing, or about tuition costs. The fund bears the risk, not you. College Savings Plan A college savings plan operates more like a traditional investment account such as an IRA or 401K. You contribute funds to the plan that grow over the years until you are ready to withdraw them to cover education expenses. While a college savings plan does not provide the same guarantee as a prepaid tuition plan, it provides more flexibility on how the funds are used. It also has the potential to provide a greater return on investment than the prepaid tuition plan where earnings of the account will be no greater than the rise in tuition cost. Roth IRA as a Last Resort If your child is about to enter college and you do not have a 529 plan in place to cover the tuition, you can pull funds from your Roth IRA without incurring the early penalties and taxes that you would normally face when taking early distributions. We caution against using a Roth IRA to cover your child’s college expenses, because the Roth IRA is one of your best retirement tools. It is however a valid option. If you choose to tap into your Roth IRA to cover education expenses you need to meet two requirements to avoid taxes on the distributions: Wait Five Years: You need to wait at least five years after first funding your Roth IRA before you withdraw any of the earnings of the account. Qualified Expenses: You must use the entire distribution for qualified education expenses. Be sure that you do not take out more than what is needed to cover these qualified expenses. Failure to meet these two requirements will result in you paying the normal tax rate on the earnings of your account, effectively eliminating the tax benefit of your Roth account. Additionally, you will pay a 10% early withdrawal penalty on any distributions that don’t meet these requirements. Takeaway A 529 plan provides a tax-efficient way to save for your child’s college education. A Roth IRA can also provide tax-efficient savings for education, but your goal should be to not touch your Roth until you retire. You should consider all the options with the following priorities: In an ideal world, you would first max out your Roth IRA contribution of $5,500 per year (if you are married your spouse can contribute another $5,500 per year to their Roth). You would then contribute to a 529 college savings or prepaid tuition plan. (You should not contribute to a 529 plan if you have not already maxed out your Roth IRA as the 529 Plan creates more restrictions). If you cannot contribute to a Roth IRA due to income limitations, you can still contribute to a 529 plan. Be sure to reach out to Monotelo if there are any questions about how to fund your children’s college education or the tax implications of an existing account. We are here to help you keep more of what you earn. 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.

With the House and the Senate both passing their own version of tax reform, there is a high chance that next year's tax rates will be lower for most taxpayers. YEAR-END TAX PLANNING STRATEGIES With the House and the Senate both passing their own versions of tax reform, there is a reasonably high probability that the United States will see a dramatic shift in tax policy in 2018. While no one knows what will be included in the final bill, there is an equally high probability that next year's tax rates will be marginally lower for most tax payers. With that thought in mind, we break down our year-end tax planning strategies into three main categories: Acceleration of deductions into 2017 Shifting of income to 2018 Best Practices ACCELERATION OF DEDUCTIONS Accelerating your deductions in 2017 could make sense for two reasons: Tax brackets may be lower in 2018 than in 2017 (hence the deductions could become more valuable in 2017 than in 2018) Itemized deductions may get phased out in 2018 Four ways to accelerate your deductions in 2017: If you are not at risk of paying the AMT (the alternative minimum tax), consider paying your 2018 property tax bill in 2017. Consider moving up medical procedures into 2017 that have significant out-of-pocket expenses. If you are planning to make significant contributions to your church or a 501c(3) organization, consider making the gift in 2017 rather than 2018. If you are a small business owner, consider making your 2018 purchases this year. This could include new and used personal property such as equipment, computers, desks, chairs, etc. Just be sure that these items are purchased and put in service by the end of the year. 1 Don't forget to review your portfolio gains and losses for tax-harvesting opportunities. SHIFTING INCOME TO 2018 IF YOU HAVE THE ABILITY TO MOVE INCOME TO 2018, THIS COULD BE A GOOD YEAR TO DO IT! If you are self-employed, one simple way to do this is to wait to bill your customers until after January 1st. Small business owners on a cash-basis can also prepay and deduct qualifying expenses up to 12 months in advance. This could include: Lease payments on business vehicles Rent payments on a commercial property lease Insurance premiums If you are not self-employed, you can do the same thing if you have the ability to move a year-end bonus into January. 401K contributions - if you do not max out your 401K each year, consider making both 2017 and 2018 retirement contributions in 2017. While this may create a challenging cash-flow situation, it may be worth the effort as the deferral could become more valuable in 2017. Distributions from retirement plans - 2017 could be the year to take the minimum required distribution from your IRA. Consider waiting to 2018 to take additional distributions. Roth conversion: 2017 could end up being a bad year to do Roth conversions. Consider re-characterizing your Roth conversion if the underlying assets performed poorly or wait until 2018 to do the conversion. Save as PDF Read more articles Share BEST PRACTICES Make sure you are contributing to your company 401k if your employer matches your contribution If you are not self-employed, make sure you are using the right plans for additional savings, whether an IRA, a Roth IRA, a non-deductible, or some other deferral option, such as annuities, cash-value life insurance and tax-efficient investments If you are self-employed, make sure you are maximizing your retirement savings opportunities using the optimal plan design; and don't overlook the opportunities to defer up to $100,000 in a Defined Benefit/401(k) combo Be methodical about gifting, and find tax-efficient methods of helping family members. This can include: Charitable gifting: Outright gifts to charities Gifts to family: Annual exclusion usage, outright gifts, gifts to a trust for the benefit of a family member. Educational savings: Tax-efficient vehicles include 529 plans Coverdell savings accounts and education IRAs. 3 2 There is little risk to implementing these tax maneuvers, and there is additional upside to you, the tax payer if there are changes to the tax code. Failing to tax plan in 2017 could cost you significant money - so don't wait to set your plan in motion! If you have additional questions or need some planning help, please reach out to us at 800-961-0298

TAX IMPACT OF THE PAYCHECK PROTECTION PROGRAM Small businesses that have their Paycheck Protection Program loans forgiven are likely to lose the deduction on their PPP expenses according to new guidance from the Internal Revenue Service. The wage and business expenses that companies use to qualify for loan forgiveness will not be deductible according to an IRS notice published last Thursday. “This treatment prevents a double tax benefit,” the agency said in the notice. “This conclusion is consistent with prior guidance of the IRS.” The new guidance clarifies a point of confusion in the $670 billion small business loan program to help businesses struggling from the shutdowns caused by the coronavirus. The law states that the forgiven loan will not be taxed as debt forgiveness, but it did not specify whether companies could write off the expenses they covered with the stimulus money. The tax code permits companies to write off business expenses, such as wages, rent and transportation expenses, but generally doesn’t allow write-offs for tax-exempt income. While the ruling adds to the list of challenges that businesses face, it is reasonable for the IRS to tell small businesses that they can’t write off expenses on income that was never taxed in the first place (no double-dip!). It is possible that the deduction for these PPP expenses could be reinstated. Since the IRS issued the notice several senators have spoken out against it stating that it is contrary to the intent of the PPP and that a fix could come in subsequent legislation. However, until such legislation is passed, be aware that you will not be able to deduct any expenses covered with funds from a forgiven PPP loan. Small businesses have reported numerous issues in trying to apply for the funds, which restarted last Monday after the initial round of funding ran out after just 13 days. Round 2 of the program, run by the Small Business Administration, provides funds to cover eight weeks of payroll costs. It is designed to encourage companies to keep their people away from the unemployment line, and fully engaged in the workforce.

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At Monotelo, we use our unique knowledge of the job-related expenses of our public-servant clients to reduce what they are paying in taxes. We Understand We understand the feelings of excitement and camaraderie firefighters get when you finish a good call. We understand the lifelong commitment you have made to staying physically fit and mentally sharp for anything that comes your way. Our monthly publication shares tips and strategies to reduce your federal and state tax liabilities. Tax Tips and Strategies Use our tax season checklist to make sure you have everything needed to file an accurate return while maximizing your potential deductions. Learn More Tax Season Checklist Get Started with Monotelo Start your free review of your past three years of tax returns Testimonials Hear what our public servants have to say about their Monotelo experience.