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Watch Out for These Common Tax Scams

According to the Internal Revenue Service (IRS), tax scams tend to increase during tax season and/or times of crisis.1 Now that tax season is in full swing, the IRS is reminding taxpayers to use caution and avoid becoming the victim of a fraudulent tax scheme. Here are some of the most common tax scams to watch … Read more

There’s Still Time to Contribute to an IRA for 2021

Making a last-minute contribution to an IRA may help you reduce your 2021 tax bill. If you qualify, your traditional IRA contribution may be tax deductible. And if you had low to moderate income and meet eligibility requirements, you may also be able to claim the Saver’s Credit for 2021 based on your contributions to … Read more

2022 Key Numbers

A popular tool, the 2022 Key Numbers document is a comprehensive list of tax bracket and deductions information to assist you as you consider your financial plan for the year. It contains the relevant numbers for:

Individual Income Tax Planning: Alternative Minimum Tax (AMT), Charitable deductions, Child tax credit, Classroom expenses of elementary and secondary school teachers, Earned income tax credit (EITC), Expatriation, Foreign earned income, Itemized deductions, Kiddie tax, Medicare tax (additional payroll tax and unearned income contribution tax), Nanny tax, Personal exemption amount, “Saver’s Credit,” Standard deductions, Standard mileage rates, 2022 Federal Income Tax Rate Schedules (Individuals, Trusts, and Estates), 2021 Federal Income Tax Rate Schedules (Individuals, Trusts, and Estates), Adoption Assistance Programs

Business Planning: Earnings subject to FICA taxes (taxable wage base), Health insurance deduction for self-employed, Qualified transportation fringe benefits, Section 179 expensing, Small business tax credit for providing health-care coverage, Standard mileage rate (per mile), Special additional first-year depreciation allowance

Education Planning: American Opportunity and Lifetime Learning Credits, Coverdell education savings accounts, Deduction for qualified higher education expenses, Deduction for student loan interest, Gift tax exclusion, Kiddie tax, U.S. savings bonds interest exclusion for college expenses;

Protection Planning: Eligible long-term care premium deduction limits, Per diem limit, Archer Medical Savings Accounts, Flexible spending account (FSA) for health care, Health Savings Accounts (HSAs)

Estate Planning: 2021 and 2022 gift and estate tax rate schedule

Government Benefits:Social Security, Medicare, Medicaid

Retirement Planning: Employee/individual contribution limits, Employer contribution/benefit limits, Compensation limits/thresholds

Investment Planning: Maximum tax on long-term capital gains and qualified dividends, Unearned income Medicare contribution tax (“net investment income tax”)

 

See More Free Tools

Ballast Advisors is a fee-based financial planning firm.  Our financial advisors serving the Twin Cities and Southwestern Florida can help you reach your retirement and financial goals.  Our offices are located in Woodbury, MN, Arden Hills, MN and Punta Gorda, FL.

IMPORTANT DISCLOSURES The opinions expressed herein are those of Ballast Advisors, LLC and are subject to change without notice. The third-party material presented is derived from sources Ballast Advisors consider to be reliable, but the accuracy and completeness cannot be guaranteed. Past performance is not indicative of future results. Nothing contained herein is an offer to purchase or sell any product. This material is for informational purposes only and should not be considered investment advice. Ballast Advisors reserve the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice. Ballast Advisors, LLC is a registered investment advisor under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about the firm, including its services, strategies, and fees can be found in our ADV Part 2, which is available without charge upon request

2021 Year-End Tax Tips

Here are some things to consider as you weigh potential tax moves between now and the end of the year.

1. Defer income to next year

Consider opportunities to defer income to 2022, particularly if you think you may be in a lower tax bracket then. For example, you may be able to defer a year-end bonus or delay the collection of business debts, rents, and payments for services. Doing so may enable you to postpone payment of tax on the income until next year.

2. Accelerate deductions

You might also look for opportunities to accelerate deductions into the current tax year. If you itemize deductions, making payments for deductible expenses such as medical expenses, qualifying interest, and state taxes before the end of the year (instead of paying them in early 2022) could make a difference on your 2021 return.

3. Make deductible charitable contributions

If you itemize deductions on your federal income tax return, you can generally deduct charitable contributions, but the deduction is limited to 60%, 30%, or 20% of your adjusted gross income (AGI), depending on the type of property you give and the type of organization to which you contribute. (Excess amounts can be carried over for up to five years.)

For 2021 charitable gifts, the normal rules have been enhanced: The limit is increased to 100% of AGI for direct cash gifts to public charities. And even if you don’t itemize deductions, you can receive a $300 charitable deduction ($600 for joint returns) for direct cash gifts to public charities (in addition to the standard deduction).

4. Bump up withholding to cover a tax shortfall

If it looks as though you will owe federal income tax for the year, consider increasing your withholding on Form W-4 for the remainder of the year to cover the shortfall. There may not be much time for employees to request a Form W-4 change and for their employers to implement it in time for 2021. The biggest advantage in doing so is that withholding is considered as having been paid evenly throughout the year instead of when the dollars are actually taken from your paycheck. This strategy can be used to make up for low or missing quarterly estimated tax payments.

5. Maximize retirement savings

Deductible contributions to a traditional IRA and pre-tax contributions to an employer-sponsored retirement plan such as a 401(k) can reduce your 2021 taxable income. If you haven’t already contributed up to the maximum amount allowed, consider doing so. For 2021, you can contribute up to $19,500 to a 401(k) plan($26,000 if you’re age 50 or older) and up to $6,000 to traditional and Roth IRAs combined ($7,000 if you’re age 50 or older).* The window to make 2021 contributions to an employer plan generally closes at the end of the year, while you have until April 15, 2022, to make 2021 IRA contributions.

*Roth contributions are not deductible, but Roth qualified distributions are not taxable.

6. Take required minimum distributions

While required minimum distributions (RMDs) were waived for 2020, they are back for 2021. If you are age 72 or older, you’re generally required to take RMDs from traditional IRAs and employer-sponsored retirement plans (special rules apply if you’re still working and participating in your employer’s retirement plan). You have to make the withdrawals by the date required — the end of the year for most individuals. The penalty for failing to do so is substantial: 50% of the amount that wasn’t distributed on time.

7. Weigh year-end investment moves

You shouldn’t let tax considerations drive your investment decisions. However, it’s worth considering the tax implications of any year-end investment moves that you make. For example, if you have realized net capital gains from selling securities at a profit, you might avoid being taxed on some or all of those gains by selling losing positions. Any losses over and above the amount of your gains can be used to offset up to $3,000 of ordinary income ($1,500 if your filing status is married filing separately) or carried forward to reduce your taxes in future years.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2021

IMPORTANT DISCLOSURES

The opinions expressed herein are those of Ballast Advisors, LLC and are subject to change without notice. The third-party material presented is derived from sources Ballast Advisors consider to be reliable, but the accuracy and completeness cannot be guaranteed. Past performance is not indicative of future results. Nothing contained herein is an offer to purchase or sell any product. This material is for informational purposes only and should not be considered investment advice. Ballast Advisors reserve the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

Ballast Advisors, LLC is a registered investment advisor under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about the firm, including its services, strategies, and fees can be found in our ADV Part 2, which is available without charge upon request.

5 Reasons to Consult a Financial Planner on New Tax Legislation

            5 Reasons to Consult a Financial Planner on New Tax Legislation The new tax legislation proposed will undoubtedly impact the tax responsibilities of those individuals and families who have multi-generational wealth.  While the highest impact will be seen generally for our ultra-high-net-worth and highest-earning clients, at Ballast Advisors we … Read more

What to Do If (When) Your Taxes Start Going Up

        One variable that is hard to plan for in retirement is taxes. There are steps you can take despite the uncertain tax landscape. Not knowing what Congress will do should not stop you from planning. What to Do If (When) Your Taxes Start Going Up Not knowing what Congress will do … Read more

Inflation is Not a Hidden Tax – It’s a Very Real Tax 

                  Do you understand how inflation will impact your overall financial plan? Consider how the concept of bracket creep can impact your tax burden and purchasing power. Inflation is Not a Hidden Tax – It’s a Very Real Tax Bracket Creep accounts for a real tax increase … Read more

Tips for Documenting Your Charitable Gifts

Charitable donations allow you to give and take—you give money or property to a qualified charity and then take an income tax deduction. By supporting an organization or cause, you may be able to lower your tax bill. As you plan your giving, it is important to keep accurate records in the event that you have to substantiate such gifts. Receipts for your charitable donations can confirm your contributions should the Internal Revenue Service (IRS) require proof of documentation.

If you make a charitable donation of cash or property, you need to obtain a bank record or written acknowledgment from the recipient charity that specifies the amount and date of the contribution, as well as the name of the charity. For IRS purposes, a canceled check for a donation of cash no longer suffices as a receipt. For property, the acknowledgment must describe the gift and provide an estimated valuation. Donations of clothing and household items must be in “good condition” in order to qualify for a tax deduction. Remember, non-cash contributions exceeding $5,000 require a qualified, written appraisal within 60 days of the date of the gift, and you must submit the appraisal when filing your taxes.

(See related post: Year-End Charitable Giving)

Honoring contributors with a gift of appreciation is a common practice, especially with online and television fundraising. If any considerations (e.g., meals, clothing, concert tickets, trips, or books) were given in exchange for a contribution, the donation statement from the recipient charity must specify the value of the consideration. Your tax deduction is reduced based on that amount.

While receipts and other acknowledgments are not filed with your annual Federal income tax return (Form 1040), be sure to carefully store this material along with other tax documents for the year in which the donations were made. As a general rule, keep tax records, including all tax forms, investment statements, bank statements, proof of deductions, or any receipts associated with a particular return, for at least six years. Preparation and organization can help ensure that you have the records you need, when you need them.

Copyright © 2015 Liberty Publishing, Inc. All rights reserved Distributed by Financial Media Exchange

IMPORTANT DISCLOSURES The opinions expressed herein are those of Ballast Advisors, LLC and are subject to change without notice. The third-party material presented is derived from sources Ballast Advisors consider to be reliable, but the accuracy and completeness cannot be guaranteed. Past performance is not indicative of future results. Nothing contained herein is an offer to purchase or sell any product. This material is for informational purposes only and should not be considered investment advice. Ballast Advisors reserve the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

Ballast Advisors, LLC is a registered investment advisor under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about the firm, including its services, strategies, and fees can be found in our ADV Part 2, which is available without charge upon request.

Year-End Charitable Giving

Even if you don’t itemize deductions on your federal income tax return, you can receive a $300 charitable deduction for 2020 direct cash gifts to public charities (in addition to the standard deduction).

With the holiday season upon us and the end of the year approaching, we pause to give thanks for our blessings and the people in our lives. It is also a time when charitable giving often comes to mind. The tax benefits associated with charitable giving could potentially enhance your ability to give and should be considered as part of your year-end tax planning.

Tax deduction for charitable gifts

If you itemize deductions on your federal income tax return, you can generally deduct your gifts to qualified charities. This may also help you potentially increase your gift.

Assume you want to make a charitable gift of $1,000. One way to potentially enhance the gift is to increase it by the amount of any income taxes you save with the charitable deduction for the gift. At a 24% tax rate, you might be able to give $1,316 to charity [$1,000 ÷ (1 – 24%) = $1,316; $1,316 x 24% = $316 taxes saved]. On the other hand, at a 32% tax rate, you might be able to give $1,471 to charity [$1,000 ÷ (1 – 32%) = $1,471; $1,471 x 32% = $471 taxes saved].

However, keep in mind that the amount of your deduction may be limited to certain percentages of your adjusted gross income (AGI). For example, your deduction for gifts of cash to public charities is generally limited to 60% of your AGI for the year, and other gifts to charity are typically limited to 30% or 20% of your AGI. Charitable deductions that exceed the AGI limits may generally be carried over and deducted over the next five years, subject to the income percentage limits in those years.

For 2020 charitable gifts, the normal rules have been enhanced: The limit is increased to 100% of AGI for direct cash gifts to public charities. And even if you don’t itemize deductions, you can receive a $300 charitable deduction for direct cash gifts to public charities (in addition to the standard deduction).

Make sure to retain proper substantiation of your charitable contribution. In order to claim a charitable deduction for any contribution of cash, a check, or other monetary gift, you must maintain a record of such contributions through a bank record (such as a cancelled check, a bank or credit union statement, or a credit card statement) or a written communication (such as a receipt or letter) from the charity showing the name of the charity, the date of the contribution, and the amount of the contribution. If you claim a charitable deduction for any contribution of $250 or more, you must substantiate the contribution with a contemporaneous written acknowledgment of the contribution from the charity. If you make any noncash contributions, there are additional requirements.

Year-end tax planning

When making charitable gifts at the end of a year, you should consider them as part of your year-end tax planning. Typically, you have a certain amount of control over the timing of income and expenses. You generally want to time your recognition of income so that it will be taxed at the lowest rate possible, and time your deductible expenses so they can be claimed in years when you are in a higher tax bracket.

For example, if you expect to be in a higher tax bracket next year, it may make sense to wait and make the charitable contribution in January so that you can take the deduction next year when the deduction results in a greater tax benefit. Or you might shift the charitable contribution, along with other deductions, into a year when your itemized deductions would be greater than the standard deduction amount. And if the income percentage limits above are a concern in one year, you might consider ways to shift income into that year or shift deductions out of that year, so that a larger charitable deduction is available for that year. A tax professional can help you evaluate your individual tax situation.

A word of caution

Be sure to deal with recognized charities and be wary of charities with similar-sounding names. It is common for scam artists to impersonate charities using bogus websites, email, phone calls, social media, and in-person solicitations. Check out the charity on the IRS website, irs.gov, using the Tax Exempt Organization Search tool. And don’t send cash; contribute by check or credit card.

 

IMPORTANT DISCLOSURES The opinions expressed herein are those of Ballast Advisors, LLC and are subject to change without notice. The third-party material presented is derived from sources Ballast Advisors consider to be reliable, but the accuracy and completeness cannot be guaranteed. Past performance is not indicative of future results. Nothing contained herein is an offer to purchase or sell any product. This material is for informational purposes only and should not be considered investment advice. Ballast Advisors reserve the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice. Ballast Advisors, LLC is a registered investment advisor under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about the firm, including its services, strategies, and fees can be found in our ADV Part 2, which is available without charge upon request.