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  • Tax Planning & Preparation | Monotelo Advisors | Elgin

    At Monotelo Advisors our accountants work hard to free up cash flow by helping you minimize your federal tax liability, giving you more money to reinvest into your future. Simplify Your Taxes with Trusted Experts Accurate, stress-free tax preparation for individuals and businesses. Learn More Schedule Meeting Start your 2024 Tax Return Tax Season Resources 7 Money-Smart Principles Every Parent Should Teach Aug 12 4 min read Student Loan Alert: Strategic Moves to Make as SAVE Ends Aug 4 7 min read Understanding the New Tax Relief for Seniors and Hourly Workers: Tips, Overtime, and Social Security Explained Jul 21 3 min read 7 Money-Smart Principles Every Parent Should Teach Student Loan Alert: Strategic Moves to Make as SAVE Ends Understanding the New Tax Relief for Seniors and Hourly Workers: Tips, Overtime, and Social Security Explained Looking for Financial Planning Help? Our values-based retirement planning will give you the quiet confidence that everything is on track for you to achieve your life goals. Get Started Learn More Run your business, we'll handle your finances. Small business owner? Yes, we can help you with your tax, bookkeeping and payroll needs. But there is so much more to having the right financial partner. Get Started Learn More

  • Tax Planning & Preparation | Monotelo Advisors | Elgin

    At Monotelo Advisors we work hard to free up cash flow by helping you minimize your federal tax liability, giving you more money to reinvest into your future. Welcome to Monotelo Advisors Tax expertise that delivers. CHOOSE YOUR DESTINATION SMALL BUSINESS PUBLIC SERVANTS TAX EXPERTISE Our Mission: To make a difference with meaningful and actionable financial solutions that positively impact our client's lives.

  • Resource Center | Monotelo Advisors

    Contact us Phone: 800-961-0298 Fax: 847-929-9134 Email: Info@monotelo.com Give us a call Schedule an appointment Find an office Schedule an Appointment Client Portal resources Need help with the portal? Click below to get help. View Resources Tax tools & tax tips Refund Tracker W-4 Withholding Calculator Documents checklist Tax Bracket Calculator File Upload Our Team Recent posts & news 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... Understanding the New Tax Relief for Seniors and Hourly Workers: Tips, Overtime, and Social Security Explained President Trump recently signed a sweeping tax-and-spending bill into law, promising major relief for millions of Americans. While some... Big Beautiful Bill Articles 25 Takeaways From the Big Beautiful Bill The newly passed legislation, referred to as the "Big Beautiful Bill” (BBB), brings one of the most comprehensive overhauls to the U.S.... Big Beautiful Bill Articles New Illinois Sales Tax Changes: What Local Business Owners Need to Know Before July 1, 2025 Beginning July 1, 2025, a new round of sales tax rate changes will take effect across Illinois, as announced by the Illinois Department... Making the Most of a New Rate Environment After over a decade of historically low borrowing costs, we’re now operating in a different world. Interest rates are up, credit is more... View More Stay up to date with the latest tax and market analysis. Subscribe to receive our weekly market and tax analysis. Site Title

  • Avoiding The 10% Threshold For Medical Expenses

    By failing to plan ahead, you will find that most of your medical expenses are worthless on your tax return. With a little planning, you can prevent this. If you fail to plan ahead, you will struggle to claim your medical expenses as an itemized deduction when April 15th arrives. You will lose the ability to deduct the bulk of these expenses because they need to surpass 10% of your Adjusted Gross Income (AGI) to be usable as an itemized deduction . This means that taxpayers who make $100,000 during the year will not be able to deduct the first $10,000 in medical expenses. That handicap essentially means you will not be able to deduct any medical expenses, unless you incur heavy medical bills in a single year. And if you are paying AMT (the Alternative Minimum Tax) - don't even think about it. When it comes time to pay your income tax bill, most Americans want to pay the lowest amount possible. One of the ways taxpayers seek to do this is by increasing the number of deductions they take on their tax return each year. So it's not surprising that one of the common questions we receive from our clients is whether or not they can deduct their medical expenses. While the simple answer is "yes," the reality for most taxpayers is "no." However, with a little planning, that answer can be "yes." If you fail to plan ahead, you will struggle to claim your medical expenses as an itemized deduction when April 15th arrives. You will lose the ability to deduct the bulk of these expenses because they need to surpass 10% of your Adjusted Gross Income (AGI) to be usable as an itemized deduction . This means that taxpayers who make $100,000 during the year will not be able to deduct the first $10,000 in medical expenses. That handicap essentially means you will not be able to deduct any medical expenses, unless you incur heavy medical bills in a single year. And if you are paying AMT (the Alternative Minimum Tax) - don't even think about it. The best way to counteract this nasty little piece of the tax code is to set up an HSA (Health Savings Account) and contribute to it each year. When you contribute to an HSA you get the privilege of deducting the amount of your contributions from your income and you bypass the 10% threshold. You can do this even if you don't choose to itemize your deductions! And as an added bonus (do we sound like an infomercial?) - the money you put into your HSA, as well as the earnings of the account, can be taken out tax free as long as they are used for qualified medical expenses. While you cannot pay your health insurance premiums with funds from an HSA, you can pay most other medical expenses. Additionally, once you turn 65 you can use the HSA to pay your Medicare or other healthcare premiums. Requirements for an HSA In order to qualify for an HSA you must have a high-deductible health plan - defined as a healthcare plan with: 1 An annual deductible of at least $1,350 for individual coverage or at least $2,700 for family coverage. 2 Maximum annual out-of-pocket expenses of $6,750 for individual coverage and $13,500 for family coverage. Once you have your HSA set up you can contribute up to $3,500 per year for individual coverage and $7,000 for family coverage. If you are over the age of 55 you can contribute an additional $1,000 annually. 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. Avoiding the 10% Threshold for Medical Expenses How do you setup an HSA? If your employer offers a high-deductible health plan, they should also give you the ability to contribute to an HSA. You can also open an account on your own through a qualified HSA provider, such as a bank or insurance company (go to www.hsasearch.com for a list of qualified HSA providers). What happens if you don't plan ahead? So what is the solution? Key Takeaways If you don't plan ahead and contribute to a Health Savings Account then you will find that most, if not all, of your medical expenses will be ineligible for a deduction due to the 10% threshold that must be met before deducting medical expenses. By setting up and contributing to a Health Savings Account you can deduct your full contribution to the account and have the flexibility to pay your medical bills with tax-free withdrawals from the account.

  • Five Retirement Mistakes

    Five Retirement Mistakes - Full Webinar All Videos Five Steps for Retirement Play Video Share Whole Channel This Video Facebook Twitter Pinterest Tumblr Copy Link Link Copied Now Playing Five Steps for Retirement 03:12 Play Video Now Playing Wages vs Distributions 02:44 Play Video

  • Roth vs Traditional IRA

    Roth vs Traditional IRA Which One Is Right For You In our last article, Year-End Tax Planning Strategies , we briefly discussed the potential benefits of a Roth IRA over a Traditional IRA. This article will dive deeper into the differences between these two retirement planning options and provide some guidance on when one makes more sense than the other. Contribution Limits You can make 2019 contributions to a Traditional IRA or a Roth IRA until April 15 of 2020. The maximum amount you can contribute in 2019 is $6,000. If you are over the age of 50 then you can contribute an additional $1,000 to either one. Additional limitations apply differently to Roth and Traditional accounts based on your income level and whether or not you are covered by a retirement plan through your employer. These additional limitations are complicated so we won't get into them now. If you want more information on these limitations you can read "Income Limitations" at the end of the article. Which Account Is Right For You? The primary distinction between a Traditional and Roth IRA is when you pay taxes on the money in the account. With a Traditional IRA you deduct your contributions from your taxable income and do not pay any tax on that money until you withdraw it in the future. With a Roth IRA you pay the tax now but can withdraw the funds tax-free in retirement. One clear advantage the Roth has over the Traditional IRA is the earnings of the account can be withdrawn tax-free after age 59 1/2. With the Traditional IRA you pay taxes on the earning as well as your original contributions when you withdraw them. So what is the advantage of the Traditional IRA if it requires you to pay taxes on your earnings? In the past, the argument in favor of Traditional IRAs was that you were likely to be in a lower tax bracket when you retire so it made more sense to defer taxes today so that you could pay them later at a lower rate. However, with the Tax Cuts and Jobs Act we are currently in one of the lowest tax environments our country has seen in decades. And with the national debt growing at an accelerating pace there is an increasing chance of significant tax hikes in the future. If tax rates rise significantly in the future you could find yourself in a higher tax bracket in retirement, even if your income decreases. With that possibility, deferring taxes now to pay them in retirement may not be the best decision. Summary The decision between a Traditional or Roth IRA comes down to your expectations for your tax bracket in retirement compared to your tax bracket today and the length of time before you retire. If retirement is still 20 or 30 years away, you may be better off investing in a Roth IRA to take advantage of tax-free growth for all of those years. If you are planning to retire in the near future, the benefit of a tax deduction today may outweigh the potential increase in taxes a few years from now, if your income drops significantly when you retire. For a deeper discussion on which account makes more sense for your personal situation, please reach out to us. Income Limitations Roth IRA: To contribute the full amount to a Roth IRA in 2019 your Modified Adjusted Gross Income (MAGI) needs to be less than $122,000 if you file single or head of household and it must be less than $193,000 if you file a joint return with your spouse. If your MAGI is between $122,000 and $137,000 ($193,000 and $203,000 if filing a joint return) then you can make a partial contribution. Once your MAGI exceeds $137,000 ($203,000 if filing a joint return) then you are no longer eligible to contribute to a Roth IRA. Traditional IRA: If neither you nor your spouse are covered by a retirement plan at work then there is no income limit to your Traditional IRA contributions. If you are covered by a retirement plan at work and file single or head of household, your Traditional IRA contribution begins to be reduced once your MAGI reaches $64,000 and is eliminated once your MAGI reaches $74,000. The rules become even more complicated if you file a joint return and either spouse is covered by a retirement plan at work. If you are covered by a retirement plan at work, your contribution begins to be reduced once your MAGI reaches $103,000 and is eliminated once your MAGI reaches $123,000. If you are not covered by a retirement plan but your spouse is then your contribution begins to be reduced once your MAGI reaches $193,000 and is eliminated once your MAGI reaches $203,000. 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.

  • Small Business Tax Planning | Monotelo Advisors

    Whether you are just starting out, or are a seasoned veteran, you need someone who will work with you to ensure that you are set up for success. Real Estate Agent Testimonial

  • 123 | Monotelo Advisors

    WHITE PAPER INTRODUCTION Our 1-2-3 case involves a husband and wife client of ours who received an unpleasant surprise when they filed their 2017 tax return. The husband and wife are both public servants, between them they are earning $225K per year. On top of this they received another $40K in interest and trust income during 2017. Anticipating a large tax bill, they decided to purchase a rental property and use the expenses they incurred to offset some of their taxable income and reduce their tax bill. During the year they spent $40K on the property. Based on advice they received from coworkers as well as another accountant they consulted, they believed they would be able to deduct this entire $40K on their 2017 tax return. THE CHALLENGE Unfortunately, when they came to us we had to tell them that not only could they not deduct the full amount, they would not be able to deduct any of their expenses on their current year return. There were 3 reasons they could not deduct the $40K they had been led to believe they would be: Cap on Losses from Rental Properties. What this couple was not aware of when they decided to purchase this rental property to write off the expenses, is the $25K limit on rental property losses that can be deducted per year. This means that at least $15K of the $40K they spent would need to be carried forward to a future year. The only exception to this limit would be if one of them qualified as a real estate professional, which they do not as this property is the only activity they have in the real estate field. Capital Expenditures. A large portion of the $40K came from improvements to the property preparing it for rent. These expenses cannot be deducted in the year they are paid but must be capitalized and depreciated over the useful life of the property, in the case of a residential rental property 27.5 years. Income Limit on Passive Losses. The final nail in the coffin for this couple’s rental loss deduction is they failed to realize there is a phase-out threshold for passive losses. Once a married couple, filing a joint return, have adjusted gross income above $150,000 they cannot take a loss for passive activities. Instead those losses are carried forward to future years until their income drops below the phase-out threshold. THE SOLUTION This couple was understandably not happy when we informed them that they would not be able to deduct any of the expenses they had incurred on the property on their 2017 tax return. They explained to us that one of the primary drives behind their purchase of the property was the tax break they expected to receive. Had they consulted with us during the year before making this purchase we could have warned them they would not be able to realize any tax breaks in the short term from the property and could have provided them with some alternative methods to reduce their tax burden for the year. By maxing out their respective deferred compensation accounts they could have reduced their taxable income by $16,000. Contributing to a Health Savings Account could have further reduced their taxable income by $7000. By failing to consult with us before making this decision they missed 3 red flags that show they would not be able to reduce their taxable income by purchasing this property. To avoid missing your own red flags be sure to seek counsel from Monotelo Advisors before making major investment decisions. Save as PDF View More White Papers

  • Deducting Business Vehicle Expenses

    July 2019 SMALL BUSINESS TIPS Quarterly: Oct 17 Deducting the Business Use of Your Vehicle If you operate a small business and you drive regularly for that business you have two choices: you can either drive your personal vehicle and reimburse yourself for the business portion of the associated costs, or you can transfer the vehicle to the business and pay all of the associated costs directly from the business. Which of these options you choose depends on the vehicle and how you use it within the business. There are no inherent tax benefits to titling your vehicle into your business, in fact doing so limits your options in how you deduct the cost of that vehicle. However, when your vehicle is 100% business use then titling it to your company can simplify your record-keeping requirements and allow you to pay for your vehicle costs directly out of your business account. The first step to decide where you should place ownership of your vehicle is to determine which vehicle cost deduction method is more beneficial in your situation. Standard Mileage Rate vs Actual Expenses There are two primary methods for deducting the cost of using a vehicle for business purposes: The standard mileage rate method and the actual costs method. Standard Mileage With the standard mileage rate you can deduct a specific dollar amount for each business mile you drive during the year (for 2022 the standard rate is 58.5 cents per mile). The standard mileage rate is used more often since it only requires you to keep track of the miles you drive throughout the year and does not require records of any other expenses. However, the standard mileage rate can only be used for a vehicle that is in your personal name. If your vehicle is titled to your business, you are required to use the actual expense method.. Actual Expense With the actual expense method you can deduct your out of pocket costs for fuel, insurance, repairs, etc. You can also deduct the cost of the vehicle by depreciating it over its asset life (typically 5 years). The actual expense method requires much more thorough record-keeping. You need to keep track of each vehicle related expense throughout the year, and if you use the vehicle for both personal and business use then you also need to keep track of the total business and total personal miles for the year Choosing the Right Method If your vehicle title is in the name of your business you are required to use the actual expense method. However, if the title is in your personal name you can choose which method to use in the first year. You can switch methods in the following years, but there are additional restrictions to do so. It is in your best interest to take the time in the first year to determine which method will be more beneficial. The standard mileage rate method is intended to simplify record-keeping requirements while still providing for an accurate deduction for the cost of using your vehicle in your business. To that end, in many cases the standard mileage rate method should provide the same or greater tax benefits as the actual expense method. However, there are specific factors that can make the actual expense method more beneficial: Price of Car: Since you can deduct the cost of a car over several years with the actual expense method, a more expensive car increases the probability that the actual expense method will be more beneficial Fuel Efficiency: With the standard mileage rate you get the same deduction no matter how many miles you get per gallon, so a less efficient vehicle will eat away at a greater portion of your allowed deduction. Highway vs City: If you are driving primarily in a large city you are likely putting much fewer miles on your vehicle while still spending the same amount on car payments, insurance, etc. If any of these factors apply to your situation then you may receive a greater benefit through the actual expense method. It is also worth noting that under the actual expense method you will receive a greater tax benefit in the first few years while you are depreciating the cost of the vehicle. Once the vehicle is fully depreciated your deduction will drop significantly. Under the standard mileage method your deduction will be relatively consistent subject only to small changes in the standard rate each year. Summary If 100% of the use of your vehicle is for your business and you have large vehicle costs either from buying a newer car or driving mostly in the city, putting your vehicle title into your business can simplify your record-keeping requirements without sacrificing the benefits of the standard mileage rate method. If you use your vehicle for both personal and business needs or you drive an older vehicle with a low market value, you may want to keep it in your personal name to preserve the option to use the standard mileage rate. Previous Article Next Article

  • Tax Planning and Preparation | Monotelo Advisors | Elgin

    What sets Monotelo Advisors apart is our unique focus on planning ahead to reduce your tax burden every year. Let us help you plan for retirement. Planning for retirement can be stressful, but it doesn’t have to be when you have a step-by-step process in place to guide you. Schedule An Appointment and get started Want to get started or learn more? Schedule a meeting, over the phone, Zoom or in person. Schedule an Appointment Learn More What We Offer Values-Based Retirement planning When your values are clear, your decisions are easy. That’s why your financial plan needs to start with your values, continue with your life goals, and wrap up with a clearly-defined road map to get you there. Explore how our planning process will provide you with a road map to having all your financial decisions in perfect alignment with your most deeply held values and life goals, by scheduling a no-obligation introductory call. Get Started what we offer Bring Alignment to All Your Financial Decisions When your values are clear, your decisions are easy. Peace of mind begins when you have clarity about your values and goals. Peace of minds arrives when there is complete alignment between your values, your goals, and all your financial decisions. Reduce your lifetime tax liability Health care and taxes are two of the largest expenditures for retirees. You have little control over one, but enormous control over the other. Our planning process will help you reduce your lifetime tax liability so your money is freed up to allocate in ways that bring you the most joy and fulfillment in retirement. Increase the productivity of your assets Having a partner who can come alongside you to help you maximize the productivity of your assets and navigate the changing phases of retirement can empower you to live your best life possible and leave a meaningful legacy to the people and organizations you care about. Peace of mind up to and through retirement Having a comprehensive financial plan in place brings you confidence that all the pieces of the puzzle are working together for your best life possible. Once your personal retirement plan is complete, we will walk with you to implement and monitor your plan. How We Help Get Started Schedule a Meeting and Prepare Your Financial Documents Schedule a meeting for a day and time that work for you. Prepare to spend 90 minutes with us and bring all your financial information to that meeting, including your tax returns, investment statements, mortgage information etc. Your Financial Road Map Meeting The road map process begins with the initial meeting. In this meeting we will help you will identify your most deeply held values and life goals. We spend the time necessary to discover the things that matter most to you so we can bring perfect alignment between your most deeply held values, your life goals and the all your financial decisions. The Plan A comprehensive financial plan is so much more than a risk tolerance survey and an asset allocation model. You plan will start with your values and your goals, and it will be designed to maximize the productivity of your assets so you can live your best life possible and leave the legacy you want to leave to the loved ones and organizations you care about. Relax and Enjoy Peace of Mind After the discovery and values-based planning process is complete, our team of advisors will come alongside you to help you navigate the changing face of retirement. From the savings and accumulation phase, to the distribution and lifestyle phase, to the health care needs and legacy phase, we will monitor your plan to keep up with your changing needs. How The Process Works Get Started Helpful retirement tips and articles. Long-Term Tax Planning: Proven Methods to Minimize Your Lifetime Tax Liability This marks the final week of our tax planning series, where we'll bring together the key concepts covered over the past few weeks. For... The Mega Backdoor Roth: A Powerful Retirement Strategy The Mega Backdoor Roth has become an increasingly popular strategy for individuals looking to supercharge their retirement savings,... IRA vs. Roth IRA: Pre-Tax vs. Post-Tax Contributions and Conversions This is week five of our 7-week series. If you wish to read our previous articles, you can chose them from the list below: Tax Planning:... View More More services from Monotelo 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 Year-End T ax Filing Services We will help you minimize your taxable income by capturing the deductions and credits available to maximize your refund. Learn more

  • 2020 Year-End Tax Planning

    YEAR END Tax Planning With roughly 6 weeks to go until we can say goodbye to 2020, 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 five 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 $19,500 ($26,000 if you are over the age of 50) for 2020. Contributions to any of these plans must be made before January 1st to apply to 2020. Before you contribute to your 401(k) you should watch our 4-minute video Why 401k Plans Are Sub-Optimal . You can also contribute up to $6,000 ($7,000 if you are over the age of 50) to a traditional or Roth IRA for 2020 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 2020 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 $40,000 (80,000 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 by selling your investments with long-term capital gains and not pay 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 choose to contribute $15,000 now to a donor advised fund and distribute $5,000 out of the fund each year for the next 3 years. 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. However, the Tax Cuts and Jobs Act has created 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 skyrocketing, you could find yourself 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. With the results of the 2020 election, time could be running out to take advantage of the low tax rates. For more information on why a Roth conversion may be a limited time opportunity watch our 3-minute video Tax Efficient Retirement Planning. Converting your traditional IRA into a Roth IRA is an option for everyone, even if you are above the income threshold to make a normal contribution to a Roth IRA. You will also not be subject to the 10% early withdrawal penalty you would face when taking early distributions from a traditional IRA. For more information on why a Roth IRA could be the right choice watch our 4-minute video The Big Picture . Return Your Required Minimum Distributions If you are over the age of 70 ½ then you are required to withdraw a certain amount from your traditional IRA each year through Required Minimum Distributions (RMDs). These RMDs can create an unwelcome tax liability. Fortunately, as part of the CARES Act, all RMDs for 2020 have been waived. This means that if you have not yet taken your RMDs for 2020 you can choose not to take any for the year. If you already took your RMDs for the year then you have a few potential options to undo them. Option 1: Indirect Rollover When you take funds out of your IRA you have 60 days to either return the funds to the original IRA or invest them in another IRA through what is referred to as an indirect rollover. If you return the funds or reinvest them in another IRA within the 60 days you can avoid any taxes or penalties that would have otherwise been due on the distribution. You can only complete one indirect IRA rollover per year. Option 2: Coronavirus-Related Distribution If you took your RMDs earlier in the year and can no longer qualify for a 60-day rollover, you may still be able to undo your RMDs by qualifying them as a coronavirus-related distribution (CVD). With CVDs you can take up to $100,000 from your traditional IRA at any point in 2020 and you have 3 years from the date of the distribution to recontribute the funds and avoid paying income taxes. If you don’t recontribute the funds you can also choose to spread the tax liability over the next 3 years instead of paying it all on your 2020 return. To qualify a distribution as a CVD you must meet at least one of the following criteria: You are diagnosed with COVID-19 using a test approved by the CDC Your spouse or dependent is diagnosed with COVID-19 using a CDC-approved test You are experiencing adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to lack of child care due to such virus or disease, closing or reducing hours of a business owned or operated by you due to such virus or disease, or other factors as determined by the secretary of the Treasury. As you can see, even if you do not meet either of the first two criteria, just about anyone in the United States should be able to qualify under the third criteria given that almost every state issued a shelter-in-place order earlier this year. By reclassifying your RMD as a CVD you can either avoid the taxes altogether by recontributing your distribution within the next 3 years, though we would recommend recontributing before the end of the year to keep everything simple, or spread the tax burden of the distribution over a 3-year period. Summary Now 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. 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.

  • Making the Most of Your Charitable Donations

    Charitable giving increases at the end of the year. If you are making donations keep these guidelines in mind to get your full tax benefit. Making The Most Of Your Charitable Donations As we approach the holidays you are most likely busy planning visits to family or getting ready for your holiday shopping. You are also likely planning to give some of your money or property to charity. Many charitable organizations report that they receive a majority of their donations in the last three months of the year. With this in mind, we want to share with you some simple guidelines to be aware of to make sure that you are properly rewarded for your generosity come tax season. There are two different types of donations that you can deduct on your tax return, donations made with cash, and donations made with non-cash items such as clothing, furniture, or food. DONATIONS MADE BY CASH Once you have determined that the organization you have chosen meets the five basic guidelines, you need to make sure that you have proof of your donation. This can be accomplished with one of the following: A receipt or other written document from the organization, showing the name of the organization, the date of the contribution, and the amount of the contribution A cancelled check or credit card receipt that shows the name of the organization, the date of the contribution, and the amount of the contribution. Keep in mind that you can also donate to most governments within the United States, if you ever feel inclined to pay more in taxes. (In which case we may not be the firm for you) NONCASH DONATIONS Noncash donations typically involve dropping off outgrown clothes or unwanted furniture at your local Goodwill or Salvation Army. The guidelines for determining if noncash donations to an organization are the same as the guidelines for cash donations. To determine the amount of a deduction you can claim for your noncash donations you need to know the Fair Market Value of the items. The Fair Market Value is the amount you could reasonably expect to receive if you sold the item instead of donating it. If you need help determining the value of your items, you can use Goodwill's Valuation Guide . When you make a donation to Goodwill or a similar charity, you should make sure you receive a receipt and keep a record of the items that you donate. This will ensure that you can take the tax deduction to which you are entitled. FIVE BASIC GUIDELINES to keep in mind when determining which donations are deductible: 1. Donations must be made to a corporation, trust, community chest, fund, or foundation. This means that donations to an individual, or a group of individuals is not deductible. For example, donating to a group of doctors who are going to the Philippines to provide medical care is not deductible, but donating to an organization that will send doctors to the Philippines is deductible. 2. The organization must be created or organized in the United States. The organization can still operate overseas, as long as it is based domestically. 3. It must operate for religious, charitable, scientific, literary, or education purposes, for the promotion of amateur sports, or for the prevention of cruelty to children or animals. 4. It must not operate for the profit of a private shareholder or individual 5.It must not engage in political lobbying Through the internet, it is easier than ever to give money to those in need. Most charitable organizations now have a website where you can donate online. This surge in online donations has led many to donate smaller amounts to various organizations, rather than one large donation to a specific organization. While this provides donors the freedom to give to the cause they most believe in, it has also blurred the lines between what is a tax-deductible donation, and what is not. To help determine which donations are deductible, see the center box. 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.

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