2018 Tax Refunds Have You Confused? Aurelia Weems Provides Clarity

Tax RefundsWe are cranking along with tax return preparation here at Aurelia E Weems, CPA, and there are some interesting things that you should know about from Tax Land (that wild, scintillating world that it is).

Look — it is our J-O-B to handle this junk so you don’t have to, which is why I make it a point to not be too tax-heavy in my notes to you. But this week, well, there’s just a few too many things to ignore.

Firstly, did you know the government “shut down” for a few hours Friday night? It was a function of the Congresspeople finally coming to a budget deal, and, well … it might mean some changes for YOU and many in The Woodlands (and it might not).

Buried in the deal were a variety of tax credits that HAD been expired for 2017 taxes, but which were suddenly reinstated. If you want to get very, very wonky, you can see the full list right here (beginning at Section 40101) — but here are some high points:

  • above-the-line deduction for qualified tuition and related expenses
  • mortgage insurance premiums treated as qualified residence interest
  • exclusion from gross income of discharge of qualified principal residence indebtedness
  • credit for nonbusiness energy property
  • credit for residential energy property
  • credit for new qualified fuel cell motor vehicles
  • credit for alternative fuel vehicle refueling property
  • credit for 2-wheeled plug-in electric vehicles

Basically, The Woodlands students, homeowners, and energy-savers got their breaks restored. If this affects you, we can amend your return if you would like to account for these breaks.

However, my suggestion is that we wait a bit to see how the IRS responds, because they don’t actually have full clarity about what they will be doing about them just yet. Shocking, I know.

But I don’t blame them, because this is pretty last-minute, even by Congressional standards.

Finally, I’m going to use my Note this week to clear up some confusion about tax refunds that have been the subject of a bunch of questions from The Woodlands clients this year. Here’s what’s really happening…

2018 Tax Refunds Have You Confused? Aurelia Weems Provides Clarity
“The truth can be funny but it’s not funny to cover up the truth.” -Ryan Cooper

Fake news is something we’re used to handling around here at Aurelia E Weems, CPA — you know the drill: “My neighbor’s uncle has a friend who is an accountant and HE said that my support parakeet is 100% deductible — and can even be counted twice!”

Yes, well … isn’t that precious.

Aside from those kinds of silly examples, there is some definite confusion about certain tax refunds this tax filing season, and we’re here to clear it up for you. Enough confusion, that the IRS issued a release about it (which you can read right here). I’ll deal with a few of those points, as well as a few other questions that we’ve received right here:

Confusion #1: Refund Delays
No, not every refund is delayed. Yes, EITC and ACTC related returns (both are child tax credits) WILL have delayed refunds. For every other kind of return in which a refund is expected, the IRS says that refunds should go out within 21 business days of filing. More about that below.

But about those EITC and ACTC refunds — unless you got some sort of advance on your refund, those might even take a little longer than was promised. The IRS said they will begin processing those on February 15th, but those refunds won’t begin to hit bank accounts until 2/27 — and that’s for those who chose direct deposit, and for whom there are no other issues.

So, hang tight.

Confusion #2: Checking On Refund Status
Have you heard that if you order a tax transcript it will tell you when to expect your refund?

Or if you call the IRS help hotline or ask US to call on your behalf that you’ll get a definite refund delivery date?

Whoops, more fake news. These social-media touted refund inquiry workarounds won’t work.

The information on a tax transcript does not necessarily reflect the amount or timing of a refund.

And as for calling us about it, we have no additional ways to check your refund status, unfortunately.

And sure, you can call the IRS directly … but be prepared to wait on hold for a looong time, and to receive no further information.

The BEST place to check, always is “Where’s My Refund” on the IRS website, which is right here: https://www.irs.gov/refunds

Confusion #3: “Is The IRS Calling Me???”
Short answer: No.

Longer answer: Nope.

Full answer: The IRS does NOT initiate contact with taxpayers by phone, email, text messages or social media to request your personal, tax or financial information.

If you are contacted in one of these ways regarding your refund — either a caller saying you owe more or an email promising a bigger refund — the communication isn’t from the IRS, even if the caller or emailer says they are agents. They are crooks looking to assume your tax identity and take your money.

Alright then. Glad we’ve cleared all of that up.

And in all seriousness: remember that we are in your corner. We’re here to help, and love to serve our Conroe, Magnolia and The Woodlands clients, so whatever advice you need, we’re just an email or phone call away.

To your family’s financial and emotional peace …

Warmly,

Aurelia Weems
(936) 273-1188

Aurelia E Weems, CPA

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5 Tips To Think More Clearly About Financial Decisions For The Woodlands Taxpayers

Financial DecisionsDespite that title, it has, in fact, been a relatively smooth first week of tax filing here at Aurelia E Weems, CPA. The Woodlands, Magnolia and Conroe clients have been streaming through our doors, and we’ve been enjoying our little mini-reunion with so many longtime friends.

Now, there’s plenty to say about that Super Bowl, the advertisements (apparently, they’re all Tide ads), the halftime show, etc. But I’ll let others weigh in there. I’m a tax professional for The Woodlands, Magnolia and Conroe after all.

But, given what happened with the stock market on Monday, I feel that I should make these quick financial points (which is closer to my area of expertise):

1) The Dow is not the economy. Good or bad.
2) Saving is almost always better than spending.
3) Fretting about the ups and downs of one market indicator will make you very tired. Don’t play that game.

Moving on, and somewhat relatedly, I posted a recent Note about retirement mistakes, and it stirred up some email responses, as well as conversation with clients in-person.

But it made me realize that in order to think clearly about retirement, taxes, or any kind of financial decision we need to be blunt with … ourselves.

That’s a difficult task, even for the best of us. But I have thoughts for you.

5 Tips To Think More Clearly About Financial Decisions For The Woodlands, Magnolia and Conroe Taxpayers
“Where you grew up has no bearing on where you decide you are going to be today.” – Dan Kennedy

Working with my Magnolia, Conroe and The Woodlands clients’ finances over the years has given me a bit of a crash course in human behavior. Often, I’m floored by the generosity I see displayed by many Magnolia, Conroe and The Woodlands clients — even those without significant means.

Other times … well, I think that we all could use the reminder that our human flaws show up very clearly in our family’s finances. The fact is that we ALL deceive ourselves, from time to time, about what’s really happening within our wallets.

This habit of self-deception threatens our financial stability. Instead of spending $10, we spend $30. Instead of recognizing that we *want* that new shirt, car, or fine dinner at a restaurant, we lie to ourselves until we are convinced that, for one reason or another, we *need* that new shirt, car, or fine dinner. The massive credit crunch a decade ago can partly be blamed on a nation full of people who convinced themselves that a $800,000 home was necessary — even though a $350,000 home was more than sufficient. We must learn to live within our income … and this sometimes means that we must stop lying.

So, I’ve compiled a short list of ideas on how to stop lying to ourselves, and to instead face the truth when making purchase decisions.

1. Have (and stick to) a budget. Is this purchase in my budget? For example, your family budgets a certain amount each month to spend on clothing. You’ve agreed that this amount is sufficient to meet your needs. So you set this amount before facing a purchase decision. If during the month you want to exceed the budget because Kohl’s is having a fantastic sale, then you are now lying to yourselves. You aren’t saving money by exceeding your budget during a sale. In fact, now you have to dip into savings to pay for your overspending.

2. Set a per-purchase spending limit. A wise man said, “The four most caring words for those we love are, ‘We can’t afford it.'” Take some time with your spouse to set what I call a “What I can spend without having to ask my spouse if it’s okay” spending limit. Some spouses have decided that neither one of them is allowed to spend more than $100 at any given time without calling and asking the other one if it’s okay (this does not apply to groceries). Let me tell you right now, these limits have stopped many from making a lot of unnecessary purchases.

3. Replace bad habits with enjoyable, inexpensive activities. Shopping or overspending is a habit that we have likely formed over years. Since our brains are programmed to react in a certain way in specific situations, any change is met by resistance. The existing habit is simply more comfortable and natural. To help change your behavior, replace the bad habit with another activity.

For example, instead of going to a The Woodlands mall to pass time, go to a local park with a soccer ball and spend some time with family or friends. Start or re-start a hobby. Your new hobby might even be a low-cost home business in which you make money!

4. Make sure that the reason you tell yourself you are making the purchase and the *actual* reason you are making the purchase are the same. Ask yourself, “Why am I really making this purchase?” Am I buying this dress for my wife because I love her and want to show my appreciation, or am I trying to prove to her and the world that I am a good provider? We lie to ourselves to cover our true motives. If the real reason you are making a purchase isn’t in line with your principles and budget, then don’t buy it.

5. Take stock of, and enjoy, everything that you already have! Develop gratitude for what you already have in your life. Purchasing new things is often a sign of ingratitude for what life has already afforded us … or a sign that we feel deficient in some area.

Overcoming bad habits and addictions is a process that requires concerted effort. Face each day one at a time, and stop lying to yourself! Don’t believe the story you’ve created in your mind that justifies unnecessary and financially harmful purchases.

To your family’s financial and emotional peace …

Warmly,

Aurelia Weems
(936) 273-1188

Aurelia E Weems, CPA

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Five Common Retirement Strategy Mistakes We’ve Seen in The Woodlands

Retirement StrategyThe IRS just began receiving tax returns this week, and we are cranking and grooving along, finding all kinds of savings on behalf of our Magnolia, Conroe and The Woodlands clients … as well as chomping at the bit to help them on THIS year’s taxes.

Truly, the more I take a look at this tax reform bill, the more I see opportunities for legal, ethical “loopholes” that might make an enormous difference on taxes. Especially for business owners.

Which, by the way, means that if you have ever had a hankering to start your own Magnolia, Conroe and The Woodlands business, this is a GREAT year to do so — even if it’s just a side hustle.

More about all of that in future Notes.

Right now, we are focused like a laser beam on 2017 taxes, and making sure that our internal and external communication protocols are working as we envisioned them. And we’re excited about all of the new clients that we’ve already heard from (thank you for your continued referrals)!

I do hope you understand, because of the busyness of this season, that we make every effort to respond to your emails and phone calls as soon as humanly possible. But if our response time is slightly longer this time of year, please remember that we are working hard to serve a variety of The Woodlands clients — none of whom are “more important” than any other — but all of whom deserve our utmost attention to detail.

Already, we’re wading through piles of financial statements and account details for our clients, and I had the idea to write a short missive to you about retirement strategy. Perhaps it’s only because it pulls me out of the world of Schedule A’s and IRS forms, but more importantly it’s because I wanted to encourage you to have a clear strategy in place when it comes to saving for your sunset years.

Specifically, I’d like to see you avoid some mistakes I’ve seen a few clients make over the years. Most of which can be fixed with a good retirement strategy, but all of which are much easier to handle when you can see them coming in advance.

#TheMoreYouKnow …

Five Common Retirement Strategy Mistakes We’ve Seen in The Woodlands, Conroe and Magnolia
“Three Rules of Work: Out of clutter find simplicity; From discord find harmony; In the middle of difficulty lies opportunity.” -Albert Einstein

One or two mistakes in handling your retirement money could mean paying a stiff penalty as you grow older. I’d genuinely like to see you avoid these — some of them merely mental, and some of them with more significant consequences.

Are you making any of them?

1. Obsessing about market losses. 
Focus on your long-term needs, not the daily ups and downs of the Dow Jones Average (or the, ahem, Bitcoin prices). Catastrophic events and long-term health care needs can cause as much damage to your nest egg as a shaky market.

2. Forgetting about inflation and taxes. 
Your retirement savings may be a lot smaller than you think when you start factoring in the rate of inflation and the taxes you’ll have to pay when you start drawing out of it. We can help you with those calculations, and they should absolutely be understood.

3. Not saving in the last years before retirement. 
Just because you’ve got just a handful of years left before you retire doesn’t mean you should go ahead and buy that new Lexus. Some people in The Woodlands are able to build up substantial savings in their last five years of work because they get serious about saving and investing.

4. Believing you can withdraw more than you really can. 
If you rely on “average” annual returns on your investments to determine just how much you can withdraw, you could be drawing down your retirement fund faster than you should. Average returns are seldom steady. A safe rule of thumb: Count on a 3 percent rate of withdrawal.

5. Not planning for a long life. 
Despite the dramatic rise in life expectancy in recent decades, many people still underestimate how long they’ll live. If you’re not thinking about longevity, you could tap out your savings much faster than you should. Look at the figures and add in at least a few extra years as you make your plans.

And lastly, remember this: We’re in your corner, no matter what mistakes you might make.

To your family’s financial and emotional peace…

Warmly,

Aurelia Weems
(936) 273-1188

Aurelia E Weems, CPA

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Are DIY Taxes Truly Free For The Woodlands TaxPayers?

DIY TaxesIf you watched any football over the weekend, you probably saw this year’s version of the popular tax software maker* touting “free taxes” or some such. Not only was the commercial fairly disturbing (it involves impalement of a person played as a joke), but the underlying message also leaves a little to be desired.

*Name of said software maker withheld for reasons of mercy and not piling on.

The tagline is: at least your taxes are free.

Yes, my writing this week’s Note could easily be seen as self-serving, but that doesn’t keep it from being true. Free doesn’t always mean “free”.

Falling prey to the siren song of “free DIY taxes” is not a good reason to use a particular tax solution. Firstly, we should note that the commercial refers to the filing fees — not the price of the software. How do you think they can afford fancy (albeit disturbing) commercials?

But there are other issues with using these kinds of softwares.

Do you remember when even the former Treasury Secretary, Tim Geithner, testified about tax irregularities in his own personal returns? Do you remember what DIDN’T help him find those irregularities?

Tax Software. (Link to a brief clip of his testimony before the Senate: http://www.youtube.com/watch?v=eKVxGlkPRlo#t=130)

And he’s not alone. But there’s a good way to fix that problem…

Are DIY Taxes Truly Free For Magnolia, Conroe, and The Woodlands TaxPayers?
“Even if you are on the right track, you’ll get run over if you just sit there.” -Will Rogers

Did you know that we accountants like to joke to one another about how good these online software programs are for our business? Firstly, they are not as “easy to use” as claimed, and secondly … they cost you an arm and a leg.

You might think they’re cheap. And on the surface, you might be right (though, in the last few years, a $1 Billion class action lawsuit was filed in the federal court in Philadelphia alleging gross misstatement of fees and deceptive standards of the federal “FreeFile” program … so even on the surface, it wasn’t always cheap).

But I’m not referring to the money for the service itself.

Using those programs can end up leaving hundreds, or even thousands of your dollars in the coffers of Uncle Sam … even if you follow all of their instructions to a tee. I see it all the time — frustrated The Woodlands clients bringing in their prior year’s tax return, astonished at all the “hidden money” my staff and I are able to find for them.

Even worse…

Choosing the wrong method, or forms, in filing your taxes can place you directly in the crosshairs for an audit.

Even if you don’t owe a ton of back taxes, you still don’t want your record to show some IRS agent that there has been a discrepancy of some kind in the past, so that red flags begin to fly, and then more bureaucratic people start looking through all of your past tax filings and current income holdings … basically taking your social security number, and poking around in your private life.

They can do a lot of things you won’t want them to do. However, if you keep a clean slate (no IRS correspondence with you, related to filing your taxes incorrectly), the opportunities for them to mess with your personal stuff will be limited.

Here’s another reason why this is so important … now more than ever. New government regulations in 2018, delays in Congressional action (SHUTDOWNS), and issues with adjusting to the tax reform bill are creating a mess in the tax industry… you don’t want to be left at the mercy of a piece of software, or a poorly-trained temp in a corporate tax prep “store”.

Yes, it can be seductive to “go it alone” … to trust a piece of software to point out possible deductions. To trust your work to poorly-trained preparers in a big box office. To protect against your chances of audits through online chat room support or hourly employees.

But it can be a big trap.

Just ask the former Treasury Secretary.

So, let’s get your financial paperwork in the hands of someone who cares.

To your family’s financial and emotional peace…

Warmly,

Aurelia Weems
(936) 273-1188

Aurelia E Weems, CPA

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Common Sense Taxpayer Information Security for Aurelia E Weems, CPA Clients

Information SecurityWe’re gearing up for tax season around here, already beginning to help certain The Woodlands, Magnolia, Conroe area clients get their returns ready for filing (yes, this early) when the IRS begins allowing receipt of electronically-filed returns on the 29th of this month.

And while we have been doing so, we have heard some things I wanted to tell you about …

You see, there is a lot of buzz flying around the tax professional community in recent days about a series of criminals who are posing as potential clients for unsuspecting tax firms around the country, trying to gain access to the data within a tax firm’s files. The fraudsters reach out, “looking for tax help”, and eventually sucker in the overly-hungry (and under-cautious) tax pro into clicking on a link or opening a document purporting to be their tax data.

Fortunately for us (and for you), we’ve already set procedures in to place that would make it very difficult for something like that to get through. We gladly will take on new Conroe, Magnolia, and The Woodlands area clients and referrals, but we have security protocols for handling our Conroe, Magnolia,and The Woodlands area clients’ data for a reason!

But that’s not the problem that concerns you…

You see, there are some other stories going around tax industry circles that would definitely interest you, if you heard them.

What am I referring to?

The horror stories for regular The Woodlands, Magnolia, Conroe area taxpayers whose identity DOES get taken by a fraudster, whether or not the source is from an unsuspecting (other) tax professional. I’ll spare you the harrowing details, but suffice to say that the IRS has not (yet) proven itself very “nimble” in dealing with taxpayers whose data gets compromised by fraud.

And I’d say that’s putting it very generously.

In short, you do not want to get caught on the bad end of taxpayer fraud (i.e., when someone steals your data to file a false return and fraudulently obtain refund dollars from the IRS).

One of the best ways you can prevent this from happening is to file your returns with us as soon as humanly possible in the season.

But there are other smart ways you can protect yourself, and that’s the subject for today’s Note…

Common Sense Taxpayer Information Security for Aurelia E Weems, CPA Clients
“We all yearn for what we have lost. But sometimes, we forget what we have.” -Mitch Albom

We’re all seeing the cultural consequences for when people seem to lose their sense of decorum and decency when handling themselves online.

But the other side of the problem is that people also seem to lose their common sense about their own extremely sensitive financial data.

My first point today is this: use your common sense. If your gut is telling you something seems fishy, then it likely is phishy. Don’t take the bait!

With that as a base point, here are some other simple security precautions I’d like to see each of our The Woodlands clients take (even those who aren’t “tech savvy”) …

1) As I already mentioned, the best place to start is to file early to lessen the window of opportunity for a criminal to file first. Even if you’re not good with a computer, you can do that.

2) If, for some odd reason, you do NOT choose to use our services this year, I urge you: thoroughly research any paid preparer or tax-preparation software. Scammers love to set up fake websites and software downloads solely designed to trick consumers into providing their personal information. If you haven’t already heard of it, don’t use it. And also: ask potential The Woodlands, Magnolia, Conroe area tax preparers to explain how they file and what steps they take to protect customer information. Information security must be at the top of your checklist over the next few months.

3) Do not use public Wi-Fi to send us your sensitive data. There are many good reasons for this, but the takeaway for our purposes here: wait until you are on a secure network to send us your data.

4) Do NOT respond to any emails or text messages from anyone who says they’re with the IRS, as the organization typically makes first contact with individuals via phone or traditional mailed correspondence. No IRS representative ever will ask for immediate payment via phone. Let us handle your correspondence with the fine folks at the IRS on your behalf!

5) Residents of Florida, Georgia or the District of Columbia can choose to get an Identity Protection PIN (IP PIN), which is a six-digit number assigned to eligible taxpayers that helps prevent the misuse of their Social Security number on fraudulent federal income tax returns. Eventually, they should be expanding this program for other states, but if you happen to have tax interests there, it’s a good idea to take advantage.

If the worst happens, and crooks do manage to steal your tax identity, we are here to help. But it’s also a good idea to check your credit report for any additional fraudulent activity. You can get copies of your credit reports directly from each of the three major credit bureaus: ExperianTransUnion and Equifax.

The IRS also wants to know about any and all tax scam attempts, so it can get the word out early and prevent or limit any potential damage. Send a copy of any phishing email to the tax agency at phishing@irs.gov.

We’re here to help. Let me know if you have any questions.

Warmly,

Aurelia Weems
(936) 273-1188

Aurelia E Weems, CPA

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Aurelia Weems’ 2018 Tax Preparation Checklist

tax preparation checklistYes, you *thought* 2017 was in the rearview mirror, didn’t you?

Well, not for the IRS it isn’t.

That’s because, as you probably know, we are now beginning the process of doing what we do best: effectively, legally, and ethically reporting our clients’ financial lives to the government for maximum savings — i.e., tax return preparation.

And while the government last week set the date for when they will actually begin accepting electronically-filed returns (Monday, January 29, 2018), that doesn’t mean that we can’t get started on pulling together what we need to have your return ready to file ASAP.

(In fact, it’s almost always a great idea to file your return as early as possible in the season … not just for peace of mind, but also because it prevents fraudsters from using your information to steal any refund that might be headed your way.)

So, to that end, I’ve put together my annual tax preparation checklist of what you’ll need to have for an effectively-prepared tax return. This is meant to be informational for you, and as something you can hold on to over the following weeks as you begin the process of excavating your financial files.

There may be certain situations where we’ll need other documentation to get you even more deductions. But, of course, we’ll let you know about that, should the situation arise.

And also, just to remind you, this is also the last tax return we’ll be filing for you under the “old” tax code. It will be interesting to have us compare what your taxes would look like under 2018 rules (at least on a very basic level), which we’d be glad to do for you, when you come in.

Aurelia Weems’s 2018 Tax Preparation Checklist
“In every single thing you do, you are choosing a direction. Your life is a product of choices.” – Dr. Kathleen Hall

With all of the changes every year (and, of course, that’s especially true THIS year), filing your taxes on your own is not for the faint of heart. That’s even with nice-looking softwares on the market which claim to make it easy for you.

But that’s what we’re here for. Let us be your easy button.

Below is a list of what you will need during the tax preparation process. Not all of them will apply to you — probably MOST will not. Nonetheless, it’s a useful checklist for all The Woodlands taxpayers.

Before you get overwhelmed: yes, this is a long list — but it’s the unfortunate reality of our tax code that it’s not even comprehensive! But these items will cover 95% of our The Woodlands clients.  Really, this is for ensuring that we’re able to help you keep every dollar you can keep under our tax code.

Even if for some strange reason you won’t be using our cost-effective services this year, feel free to use this list as a handy guide…

Personal Data
Social Security Numbers (including spouse and children)
Child care provider tax I.D. or Social Security Number

Employment & Income Data
W-2 forms for this year
Tax refunds and unemployment compensation: Form 1099-G
Miscellaneous income including rent: Form 1099-MISC
Partnership and trust income
Pensions and annuities
Alimony received
Jury duty pay
Gambling and lottery winnings
Prizes and awards
Scholarships and fellowships
State and local income tax refunds
Unemployment compensation

Health Insurance Information: NOTE — despite the passage of tax reform that changes this information for 2018 taxes, we still need it for 2017 taxes.
* All 1095-A Forms from marketplace providers (if you purchased insurance through a Marketplace)
* Existing plan information (policy numbers, etc.)
* If claiming an exemption, your unique Exemption Certificate Number
* Records of credits and/or advance payments received from the Premium Tax Credit (if claiming)

Homeowner/Renter Data
Residential address(es) for this year
Mortgage interest: Form 1098
Sale of your home or other real estate: Form 1099-S
Second mortgage interest paid
Real estate taxes paid
Rent paid during tax year
Moving expenses

Financial Assets
Interest income statements: Form 1099-INT & 1099-OID
Dividend income statements: Form 1099-DIV
Proceeds from broker transactions: Form 1099-B
Retirement plan distribution: Form 1099-R
Capital gains or losses

Financial Liabilities
Auto loans and leases (account numbers and car value) if vehicle used for business
Student loan interest paid
Early withdrawal penalties on CDs and other fixed time deposits

Automobiles
Personal property tax information
Department of Motor Vehicles fees

Expenses
Gifts to charity (receipts for any single donations of $250 or more)
Unreimbursed expenses related to volunteer work
Unreimbursed expenses related to your job (travel expenses, entertainment, uniforms, union dues, subscriptions)
Investment expenses
Job-hunting expenses
Education expenses (tuition and fees)
Child care expenses
Medical Savings Accounts
Adoption expenses
Alimony paid
Tax return preparation expenses and fees

Self-Employment Data
Estimated tax vouchers for the current year
Self-employment tax
Self-employment SEP plans
Self-employed health insurance
K-1s on all partnerships
Receipts or documentation for business-related expenses
Farm income

Deduction Documents
State and local income taxes
IRA, Keogh and other retirement plan contributions
Medical expenses
Casualty or theft losses
Other miscellaneous deductions

We’re here to help. Let me know if you have any questions.

Warmly,

Aurelia Weems
(936) 273-1188

Aurelia E Weems, CPA

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4 Goals To Jumpstart Your Financial Freedom In The Woodlands In 2018

financial freedomIt feels VERY good to turn the page on 2017, doesn’t it?

There were so many hard things that we faced as a nation that the opportunity to start fresh feels particularly bright this week.

Obviously, and as I’ve already written about in some detail, we have a brand new tax regime under which we are NOW operating. The year-end tasks are no longer available to us (aside from some IRA moves you can still make), so with your permission, my team and I are taking a breath from excavating those details and are focusing like a laser beam on getting your 2017 taxes prepared and filed with maximum savings, integrity, and care.

We are in your corner.

I’ll be in touch soon with some things that YOU can do to prepare, even as WE prepare; but in the meantime, let’s talk about 2018 and your goals, shall we?

4 Goals To Jumpstart Your Financial Freedom In The Woodlands In 2018
“Those who do not remember the past are condemned to repeat it.” -George Santayana

There is a big problem with many peoples’ financial resolutions: They don’t usually last even until the end of January.

But the ones I’m about to recommend to you here can, because they’re incremental AND anyone in The Woodlands can do them.

Making a permanent change in our behavior requires both time and a steely resolve. But if we attack these things on a step-by step basis, I’ve found that we can develop financial character one action at a time.

So in that vein, here are some things you can do, in a sequential order, that will make a huge difference in your financial year. If you’ve already got one down, check it off, and move to the next on the list.

Financial Freedom Goal #1
EVERYONE START HERE: Resolve to become (and stay) debt free.
Now, clearly I’m not Dave Ramsey, but there’s a reason why he’s become so popular: his approach works.

So, as a start, I’d say that you can have a fixed-rate, fixed-year traditional mortgage on your The Woodlands house — but shoot for nothing else. No HELOC. No car payments. Certainly no credit card debt. Because you simply have to learn to live within your means — which, unfortunately, sometimes means going without. The millionaires among us in The Woodlands really are frugal.

You can learn to enjoy the process of chipping away at your debt, and it’s truly the best and first place to start.

Financial Freedom Goal #2
Automate your savings (i.e., Pay Yourself First).
Does your company offer a 401(k)? Get the entire match. Usually this translates to saving 5% of your salary while the company contributes a 4% match, which is the fastest way to get an 80% return on your money. Most Americans forgo this match, believing they need to spend 100% of their salary. But you can learn to think like a millionaire and live well on 95% of what you make.

If you don’t have a 401(k) plan, act like you do, and sock away 5% automatically. Or talk to your employer about different company savings vehicles.

Financial Freedom Goal #3
Fully fund your 2018 Roth IRA.
This is $5,500 in 2018 and $6,500 if you are older than age 50. And if you can’t manage the entire amount in January, it equates to a $460 monthly savings. Automating these savings plans are relatively painless — it’s the living without after the fact which seems difficult … until it isn’t.

Set your savings on autopilot, and pat yourself on the back.

Remember — these steps build off one another, so if you already have done the first 3, here’s your next step:

Financial Freedom Goal #4
Save another 5% in a taxable investment account.
Automating savings is great, automating investment is even greater. Key word here: automate. At this point, you’re hitting a mark of saving 15-20% of your income. That’s a fast-track to long-term prosperity.

In terms of WHAT you invest in, there are many great options. Index funds are a great place to start, but every person’s situation in The Woodlands is slightly different .

And so, yes: These are the basic, first steps. I’ll have more sophisticated advice moving forward.

But get these going this month, and start your financial 2018 on the right track.

Happy New Year!

Aurelia Weems
(936) 273-1188

Aurelia E Weems, CPA

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4 Key Year-End Tax Strategies With Tax Reform In Mind For The Woodlands Taxpayers

tax strategiesWe’re in that annual holiday lull during which most of the country takes things real easy, tries to recover from all of the parties, and gears up for a new beginning.

For tax professionals, however … well, let’s just say that we don’t often get a “normal” holiday season, and this year is even more intense as we process all of the changes coming down the pike for next year. There was hope by many that this tax reform bill would simplify things for many taxpayers in The Woodlands, but I am sorry to say that is not actually the case.

(I do want to warn you in advance that this note has a lot of information, and a lot of tax-savings strategies in it. It is a bit long. But time is short before the end of 2017, and some of these strategies can save you a bunch of money if you are able to act quickly.)

Back to the tax reform bill … I saw an article the other day in a publication for tax accountants, and they referred to the recently-passed bill as “The Accountants’ Full Employment Act”.

Yes, there’s a lot of talk about how taxes have gone down for about 80% of the population, and we here at Aurelia E Weems, CPA are obviously pleased about that on behalf of our The Woodlands clients.

But “simplified” tax preparation is not something that was accomplished by this bill, especially for business owners — but really, for a majority of The Woodlands taxpayers. Yes, the standard deduction is much higher, and that will make sense for some of our clients to take.

However, as I’ve alluded to previously, there will be an entirely different kind of decision matrix for financial decisions. Some will be simpler, others will be more complex, but regardless, we’re on the case for you.

The IRS has yet to issue actual guidance for tax professionals on these changes, and there will be many “technical corrections” still to come (the bill was passed rather quickly), but again, we DO know some things that will save you some money if you take some action during this normally-slower week.

I’ve put together some big ideas that will help. The last one, in particular, is one that might merit your attention. All of these are, of course, a personal decision — and we’re here for you regardless.

Shoot me an email by using the link at the top of the page or call us ((936) 273-1188) if you need help.

4 Key Year-End Tax Strategies With Tax Reform In Mind For The Woodlands Taxpayers
“Life is the art of drawing without an eraser.” -John W. Gardner

Year-end can be a snoozer for some The Woodlands taxpayers, and I don’t always “push” very hard on certain things with my clients.

But with a radically different — but sadly, not simplified — tax code for 2018, it would behoove you to sit down and make a little bit more of an effort ahead of this particular year’s end than perhaps you have in previous years — so that you can potentially save even more.

None of these tax strategies require a lot of time or effort, but they are different than in years past.

Here we go:

1) Consider donating more aggressively to charity. 
The ability to deduct for charitable contributions isn’t going away. But for some taxpayers who end up taking the increased standard deduction (which nearly doubles, from $6,350 in 2017 to $12,000 in 2018 for singles and $12,700 in 2017 to $24,000 for couples in 2018), giving to charity NOW will provide a much bigger bang for your buck.

And further (and speaking of bang for your buck), because of the new, lower rates across most tax brackets, your contributions in 2017 are “worth more” in tax deduction power than they will be in future years. If your tax bracket falls from 28 percent to 24 percent, for example, the value of a $100 charitable deduction drops from $28 to $24.

One more idea on this topic: This is a great year (2017) to give away appreciated stock or securities.
This has two benefits: a deduction for the fair market value of the security versus getting a deduction for the lower cost basis in 2018 of up to 30 percent of adjusted gross income (or 20 percent if contributed to a private foundation); plus the capital gain on the appreciated security is not taxed.

2) Consider making an additional mortgage payment. 
Again, this is especially true if we think we might not itemize your deductions for your 2018 tax return. You might not get the benefit from deducting that interest payment, and so, if you’re able to, this will help your 2017 tax bill and not do anything to help you in 2018 taxes if you take the standard deduction.

Plus, there is a larger interest deduction in 2017 even if we *do* plan to itemize under the new bill.

One potential pitfall: check with your lender to make sure this payment goes to interest as well as principal. Sometimes, additional payments go straight to paying down the principal — which is a great practice for saving long term on your mortgage, but which doesn’t help you with your taxes.

3) Defer income until 2018 begins. 
I’ve written previously about this, so I’ll keep it short: Employees often cannot control the timing of their paycheck, but it never hurts to ask. Lower marginal rates across the board for 2018 means that where it’s possible to shift income into 2018, do so.

4) Consider pre-paying or making a deposit towards OUR fees. Anything that you invest with us for handling all of your tax preparation needs, unfortunately, is no longer tax deductible in 2018. But you can pre-pay now and still receive that value for 2017 taxes. Even if the actual fees for your return end up being different than what you actually pay, anything you pay in 2017 will be deductible on this year’s taxes (even if you are paying for services you don’t receive until 2018 or beyond).

So you get a real-life discount (in terms of tax deduction opportunities) if you choose to invest in our services before year-end. Send me an email through the link at the top of the page, if you are interested in this, and we will follow-up with you as needed. And if for some reason your fees end up being less than what you pay, we’d be glad to refund you the overage or hold it as a credit for future services (and in the case of maintaining the credit with us, you will keep the deduction!).

I hope this helps. Again, this is a bit of a longer note, especially for the “last-minute tax tips” subject. And there are potentially other, less common moves that might make sense for certain of our The Woodlands clients.

Now you understand why our holidays are a little busier than for some other professionals!

We’re in your corner,

Aurelia Weems
(936) 273-1188

Aurelia E Weems, CPA  

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2018 Tax Reform Update And A Holiday Prayer from Aurelia

holiday prayerWell, we seem to have a final tax plan in place, and if everything goes according to what Capitol Hill watchers say, it should pass both the House and Senate this week, and be signed into law by President Trump.

And my, oh my, are there changes.

One that I should point out to you, since I mentioned it last week: Congress put in a change that now means you can NOT prepay your 2018 state income tax to pick up a deduction in 2017 after all. That said, you can pay everything now that you will pay with your 2017 filing (because the last thing you want is to have to pay in 2018 for state taxes in 2017).

Starting in 2018, you can still deduct up to $10K of state and local taxes and property taxes. In high tax states, this is going to hit you hard, because you’ll be losing some of those deductions.

However, there are plenty more deductions to be had under this new regime that *should* offset some of these losses … if you know what you’re doing.

So I’ll be taking the time over future weeks and months to dive into all of these changes on YOUR behalf. Rest assured — we pay attention to these things so you don’t have to. I know that tax software makers and a certain breed of complacent tax professionals are scrambling to catch up, but we’ve been watching these things closely, and our clients in the Woodlands Area will benefit greatly from that attention.

Because, well, the tax code is still complicated. In fact, it’s even more complicated for many brackets and categories. After all, the breakneck speed with which Congress pursued tax reform may well result in certain political victories, but it has also left behind lots of goodies for people in the Woodlands Area who have a smart tax professional in their corner.

Which, ironically, is the one thing true tax reform is meant to “fix”. But in 2018, there will be opportunities all over the place for good planning.

One quick, easy tipalmost everyone, if possible, should delay income for these next few weeks into 2018 if at all possible. Employees often cannot control the timing of their paycheck, but it never hurts to ask. Lower marginal rates across the board for 2018 means that where it’s possible to shift income into 2018, do so.

Again, much more to come on these topics.

I’ll leave you today with my annual holiday prayer. I love this one, and share it every year because it’s more and more pertinent. As we shout past each other online, and it bleeds into our interactions in person (“IRL”, as the kids say) we should remember that there are real stories behind every person.

May we see each other with clear eyes.

2018 Tax Reform Update And A Holiday Prayer from Aurelia
“People travel to wonder at the height of the mountains, at the huge waves of the seas, at the long course of the rivers, at the vast compass of the ocean, at the circular motion of the stars, and yet they pass by themselves without wondering.” -St. Augustine

“God, help us remember that the jerk who cut us off in traffic last night is a single mother who worked nine hours that day and is rushing home to cook dinner, help with homework, do the laundry and spend a few precious moments with her children.

“Help us to remember that the pierced, tattooed, disinterested young man who can’t make change correctly is a worried 19-year-old college student, balancing his apprehension over final exams with his fear of not getting his student loans for next semester.

“Remind us, Lord, that the scary-looking bum, begging for money in the same spot every day (who really ought to get a job!) is a slave to addictions that we can only imagine in our worst nightmares …

“Help us to remember that the old couple walking annoyingly slowly through the store aisles and blocking our shopping progress are savoring this moment, knowing that, based on the biopsy report she got back last week, this will be the last year that they go shopping together.

“Father, remind us each day that, of all the gifts you give us, the greatest gift is love. It is not enough to share that love with those we hold dear. Open our hearts not to just those who are close to us, but to all humanity. Let us be slow to judge and quick to forgive, show patience, empathy and love. ”

Amen.

May your season be truly bright.

Aurelia E Weems
(781) 767-7473

Aurelia E Weems, CPA

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Conventional Financial Advice May Not Always Be Best by Aurelia E Weems

financial adviceJust to give you a little snapshot of why it’s taking so long to get tax reform done (and I know — you’re surely waiting with bated breath), consider this: under certain circumstances with the proposed reform, some people would face a marginal tax rate of over 100%.

The WSJ did the analysis over the weekend, and it is correct by my reckoning.

Which, of course, is exactly the sort of thing I was referring to last week when I said that the prospect of diving into the new laws and finding savings is “appetizing” for someone like me. Because even if the law passes as currently formulated (and remember, nothing is yet passed), there are ways that those same people who might face 100+% tax rates could pay much LESS tax.

But only if they have a pro in their corner.

For instance, I’ll offer you this piece of advice: It looks pretty certain that you’re not going to be able to deduct your state and local income taxes in 2018. Both the House and Senate bills kill this deduction.

This means that if you can find a way to pay (or even overpay) your state and local income taxes NOW, before the end of 2017, you will be able to deduct them from this year’s taxes. But you almost certainly won’t be able to deduct them next year (even for tax payments that are “assigned” to previous years).

That’s just one example of not letting these things just “happen” to you.

Too many people in the Woodlands Area opt for the status quo ante approach, which, when it comes to taxes, can often mean trusting a piece of software to spit out the right numbers and somehow magically find all the right deductions for their specific life in the real world. A piece of software won’t be able to tell you things like I just told you, and at the right time.

Or it can mean purchasing something that you “just have to have”, because that’s what you’ve always done or because that’s what you see “everyone” around you in the Woodlands Area doing.

If 2017 has taught us anything, it should be that this is not the age in which conventional wisdom is always right.

So, here are some other pieces of conventional financial wisdom that may NOT be right for you.

Conventional Financial Advice May Not Always Be Best by Aurelia E Weems
“A bank is a place where they lend you an umbrella in fair weather and ask for it back when it begins to rain.” -Robert Frost

You can find lots of advice in the Woodlands Area on handling your finances, but not all of it is valid for everyone. That’s why it’s always helpful to have someone who can speak into your specific situation. Because we shouldn’t just assume that the following “rules” are always true…

1) Always invest for the highest return. 
High returns frequently involve higher risks, as well as bigger fees. You may be better off seeking safer, more conservative investments, even if they don’t produce as much in the short run.

2) Homes are always good investments. 
You may think that renting is just throwing dollars down the drain, but remember that homes can be an expensive proposition, with high transaction costs, and constant maintenance expenses. You may save more money by renting until you can better afford a house of your own.

3) Avoid debt at all costs. 
Generally speaking, Dave Ramsey is usually right when it comes to financial principles. And you should certainly avoid overextending yourself. However, some debt can be useful when buying a house (when that’s appropriate — see above), or in certain business situations. Just be sure you can comfortably manage it, and pay it off on time, and with as little cost as possible.

4) Sell when your stock is high. 
What goes up must come down, right? But you want high-performing stocks in your portfolio at all times, so resist the urge to cash out just because a stock has reached an all-time high. Otherwise, in time, you could end up with a bundle of low-performing investments.

5) You can do everything yourself. 
You can trade your own stocks if you want, but you’ll often do better working with a good financial planner from the Woodlands Area. And you can prepare your own taxes, but, well, as I think you probably understand, it’s better to work with someone who knows the system like the back of their hand.

We pay attention to this stuff so you don’t have to. And we’re in your corner.

Warmly,

Aurelia E Weems
(781) 767-7473

Aurelia E Weems, CPA

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