Wednesday’s deadline will end as all the other April 15ths have on calendars past, a mad rush on Monday (mentally the last day) to get data tweaked, lost deductions resolved and the returns that simply took too long done.
When those clients are called at the last minute the messages conveyed are far too often regretful and should not be!

If your clients have complex assets, K-1`s and or other kinds of investments that are allowed to push out the reporting forms late in March those filers getting documents just before the deadline should be coached by you to turn a mental and behavioral corner in their lives.

“Before retirement bob you’re holdings were simple and w-2s came out first and February is when you filed. You did that for 25 years so it became a habit.”
Now that your retired and managing your assets with the complex ideals of Tax effective retirement income and with an estate planning as a second agenda you are using different tools that cannot and do not release documents until mid-March.

You need to get used to the “retired tax calendar” which is two dates per year. Let’s set the first date now for somewhere between Thanksgiving and Christmas which is when we are going to meet next, review the year and make sure next year’s cash needs are in liquid form. Then we will rough in your 2015 tax return and “guestimate” the last months income and see what we are looking like. That way if there is a problem we have a few weeks to fix it. Perhaps you inherited a sisters estate and she had IRA`s, we can un convert planned Roth conversions we accomplished this June because the surprise additional IRA income would change the plan (sorry for killing off your sister!)
Or what if we had a big winner in the stock portfolio…we could sell to take the capital gain but also cherry pick some losers to sell as well so the line 13 entry on your 1040 is negative (3000) the most the IRS allows.
Don’t worry if you want to keep your losers well rebuy them in your IRA, buy an ETF equivalent or purchase options so you won’t miss the opportunity you feel they represent.
Plan on the “tax rough in” date every November or December as the new normal Tax Day not February the following year when it’s too late to fix problems. The second date is April first. YOU ARE NEVER FILING AN ACTUAL RETURN AGAIN BEFORE THAT DATE!
That’s the new normal and since you’ll already know from the planning meeting what it’s going to look like within a few dollars it isn’t a surprise. Getting the paperwork in is just the proving our November planning was correctly done.

Change your client’s habits, change your mindset and theirs!
The Tax What if Doctor;-)

Not Just You: Taxes Really Take Longer This Year | Financial Planning Not Just You: Taxes Really Take Longer

(Bloomberg) — Tax season is supposed to be over on April 15. But among certain groups—especially the wealthy—filing for an extension until Oct. 15 is now routine.

In 2011, 11 million taxpayers filed for an extension; two years later, 13 million did, an increase of almost 20%. At the end of September 2014, more than 25% of those who had filed for an extension were still working on their filings. We’re not just procrastinators. It has gotten harder to file on time. Here’s why:

Now that the complex documents are out and arriving in peoples E-Mails, Mail and Fax Machines keep in mind a few important things.

First the K-1 instructions are very important to the preparer! Often people get supporting documents with W-2 and other less complicated tax documents and develop the habit of disregarding them, cant do that with K-1 instruction sheets, they are a necessary part of the document! Hand it all over to the preparer and let them decide what`s important!

Second the Tax status of those same K-1s are often IRA and not necessarily included on the tax return. Sounds like a contradiction to the first item but bring the status of the document to the preparer`s attention. Many companies produce a K-1 with disregard as to whom or how its custodianed. I`ve seen CPA`s labor for 15 minutes over a K-1 to then realize it was in an IRA and that they must now undo a lot of data entry.

Lastly, we aren’t at Nirvana yet with cost basis reporting on Brokerage accounts so heads up! Look at the statements and if a stock or bond sale took place, especially look at the STCG or LTCG reporting and make sure the cost basis is stated. Otherwise its of no use to your tax preparer so get that info for them before you hand it over. Otherwise they are going to have to stop in the middle of your prep and hunt you down for the answer or guess and generally both are not good.

Keep these simple things in mind as they are very common pitfalls that lead to delay of work, higher cost tax preparation or worst of all ….letter audits in a year or two.

Hope it goes well for you,

the Tax What if Doctor;-)

I am seeing articles, blogs and tweets about Robo Advisors as if the model they are talking about is the only definition, so wrong!!! The term of art will end up meaning as many things as Financial Advisor has ended up meaning and being a Robo advisor will be for many  a badge of honor the clients gravitate towards!

Just one small example of this is an article in FP penned by Mike Cohn last Tuesday about Americans now worrying about on line tax filing where he states,

A majority of Americans continue to be concerned about the privacy and safety of their personal and financial data when filing their tax returns online.

According to a new survey commissioned by Taxsoftware.com, 70% expressed concerns about the safety of their data when using desktop computers to file their state and federal tax forms. In addition, 68% said they are concerned when using their iPads or tablets, while 69% are concerned when using their smartphones.

All of the results indicate dramatically higher concerns than when the survey was originally conducted in 2012. Three years ago, 52% of the survey respondents expressed concerns with using desktop computers, 42 percent when using iPads or tablets, and 54 percent when using smartphones.”

Think I am arguing against my own point….ohhhh contraire. The Robo advisor that is the future is expressing the danger of being a DO IT YOURSELFER in the on line Tax, direct to market Brokerage and all the other self serve tools in the world without a coach to help them do it safely will stand out. A big part of that Robo Advisor mission statement will be what also separates the winners form  the losers in the next great race for clients.

The advisor is now tasked with both knowing his business and bricks and mortar operations but also the “Secure Cloud” operating platforms that people are just becoming aware of!

The Cloud is one thing……..The Secure Cloud is completely different and advisors that figure that out and use that as an acquisition tool when competing will be the right kind of Robo advisor! In the old days while competing for a client you might have needed to do Alpha and Beta comparisons and Morningstar  report reviews. In my opinion in the new world the tools to separate the prospect from the current advisor will be as simple as asking, “So let me understand this, he told you to e-mail your RMD statement to you? or “she let you use drop box to send that document with your social security number on it?”

You cant stop the coming of technology but that doesn’t mean you need to narrowly define it or fall victim to it!

The Tax What if Doctor;-)

I was on the phone yesterday with a new Tax Office owner we support in the cloud and one of his business clients. He was a great planning client and had many talents and sources of income and had created a “self caused” tax mess for himself strictly because of the lack of planning a coordinated outcome of how his companies, K-1`s and other cash flows that would land together on his return. We talked about a schedule C business he had and the lack of deductions on the return that should be taken and are legitimate such as the  “zero dollars” in advertising on the schedule against 100K of gross income!?!?  I said, “even if its a 10.00 web site and a 10.00 vista print business card, you must have spent something??”  In fact he had but like many people have a problem with wearing two, let alone five, hats and was simply afraid of the IRS auditing him.

Which brings me to my point (sorry sometimes that takes awhile because of my ADHD:)  If you keep a folder with articles published about all the common problems and issues people have with Tax Planning then after you discuss a topic like this you can follow up the conversation with a link to the article to support the discussion. If the client has not yet joined us in killing the print industry, then mail a copy to them, fax or otherwise deliver a third party article to help them relax and accept the information recently shared by you.

In this case I would share this article I read in FP today;

http://www.financial-planning.com/news/tax_planning/irs-doing-fewer-business-audits-due-to-budget-cuts-2692127-1.html?zkPrintable=true

Start your own library of articles and storys, it will help close or cement pending business!

The Tax What if Doctor;-)

Every year we have a few “new to us” business owners come in to our offices in Glenburn in late March or early April that have S Corp. tax returns to file and they are past the deadline by several weeks or longer. The nature of a pass through entity is that the filing does not require a payment but it officially  issues a K-1 to the owner of the S Corp. a month before their personal filing deadline of April 15th.

Any Tax Office Owner that’s new could potentially make the same error… so now’s a good time to look at the calendar and go through your client data base especially for prospects or suspects that might have eluded that they would use your Tax office services this year but have not called or come in to see you as of yet. Just check in with them and remind them that the deadline for corporate tax returns (Forms 1120, 1120A, and 1120S) for the year 2014, or to request automatic 6-month extension of time to file (Form 7004) for corporations who use the calendar year as their tax year. (The normal deadline for corporate returns is March 15th, but this falls on a Sunday, so the deadline is pushed to the next business day, which is Monday, March 16th.)

This could save a few people that are about to make this mistake as well as help you real in a few prospects that might be on the fence about whom they are going to use. Proactive Tax Office owners are rare and so a few minutes of phone time could make you the winner!!

The Tax What if Doctor;-)

As I write, this morning, its already been a long cold winter and we have had more than our share of snow. With four feet of snow on the ground in Bangor we are forecasted for a second blizzard on Sunday and another two feet. Winter is only half over and it just feels like we have no control and we are at the mercy of “another power”. At this point we only can hope the greater power will allow us to live. THAT’S how people often feel about there tax return!

The IRS is unappreciated for its incredible sales positioning over the years as they have done an amazing job making people feel the way we are about the snow right now but about their tax returns and tax outcomes.

Of course just like preparing for winter the snow does not need to be overwhelming. You can keep an extra shovel, have studded tires on your car and own a long handled snow roof rake. Chemical hand warming pouches for inside your gloves are everywhere and 99 cents. You can also board a plane at Bangor International Airport any morning and be in Florida for lunch, so you are in control if you prepare or react. The same is also true of your Tax burden. You can prepare and or react or both and have an incredible amount of control over your Taxes.

If you`re self employed you can keep a “deduction diary” and keep good records of your deductible mileage. Its a surprising fact that most people UNDER REPORT the deductible miles they drive each year because they aren’t keeping daily records and they underestimate at the end of the year. Also learning to “Live in your corporation or schedule C business” can put thousands of your own dollars back in your pockets and is often not done as the tax payer feels like the Tax due is the snow out the window and its just “gonna come whatever it is.”

If you didn’t keep good proactive records that you can react instead. Making larger gifts to charity and not just of cash but old office equipment or other items you`re not going to use. Sell stocks that are currently lower in value that what you paid, don’t worry you can buy the ETF equivalent if you don’t want to wait 30 days to repurchase them. Open IRA`s, SEP`s or other retirement accounts to rake off 10,000+ of taxable income right off the top of your taxable base. BE in CONTROL!

Treat your taxes the same as you would winter. Of course you cant change that the event will happen but you can prepare and react and make the affect on you… what you want!

The Tax What-if Doctor;-)

Did you used to own a brick phone or even did you have to stop at pay phones?  We did.  Did you remember when the Internet started, like before you had e-mail?  We do.  I still have an AOL account out of habit.  Guess what.  It’s all still changing just as fast.  You’ve just stopped being excited about it.  Instead, you’re tired, maybe intimidated a little.  Do you say “dial the phone” to people?…that confuses the young!  Marketing has evolved from door knocking to robo-dialing, from fax blasting to e-blasting, and now it’s YouTube, text blasting, social media, and way more.  Robo-dialing was stopped with do-not-call lists.  Fax blasting was stopped by legislation.  E-blasting was stopped by spam laws.  Now you have to double opt- in, yada-yada.  Where are you in the evolution of marketing?

Dinosaur, Early Primate, Neanderthal, Caveman, Evolving Man(advisor) ,Advisor with YouTube account?

Are you still coachable?  Do you want to evolve your marketing and stay relevant, even grow, in the next marketing cycle? We have great tools and processes for this all to be “yes”!

Are you using what we have given you?

The Tax What if Doctor;-)

President Barack Obama is proposing a fundamental change in tax policy that would limit what many Americans can leave to their heirs. It will affect people who aren’t wealthy enough to pay estate taxes, if their assets have gained sharply enough in value as well as very wealthy people who can afford to pay.

A family home or a stock portfolio that grows in value to $1 million over the years and goes to a child could be subject to taxes on that gain, whether or not it’s sold.

Though it’s likely to go nowhere in the Republican-led Congress, the plan lays down a marker for future Democratic tax policy. That prospect is prompting people to seek advice from estate planners and lawyers as they consider the proposed new tax at death that could expose a family home, business or securities to more than 60 percent in combined federal and state levies.

Obama’s proposal, which will be detailed in his budget plan on Feb. 2, would impose a capital gains tax at death on the growth in the value of assets since they were purchased, except for those donated to charity. The plan also raises the top capital gains rate to 28 percent from 23.8 percent.

The  “Exemption” for new proposed rules are relatively small,

There would be a $200,000 exemption plus a $500,000 exemption for homes. For the $1 million home initially purchased by a married couple for $250,000, that would mean $500,000 of the gain would be exempt and a federal tax of up to $70,000 would be owed on the remaining $250,000 in appreciation.

It’s one of the plans Obama is pushing in his final two years in office that resonate with those concerned about income inequality and policies that promote inherited wealth.

Gift-giving is a particularly advantageous strategy for assets — like a growing business — that have a relatively low value now but are expected to increase.

Currently, upon one’s death, the estate is assessed the federal estate tax with a top rate of 40 percent on property. Yet it applies only to the handful of Americans with more than $5.43 million in assets and for married couples with more than $10.86 million.

If and when heirs sell, they owe capital gains taxes only on the difference between the sale price and the value when they inherited the asset.

In some cases, all appreciation during one’s lifetime can go untouched by the capital gains tax. That gives people an incentive to hold onto assets for tax reasons, especially if they have a low-cost basis, or the value when purchased.

The Treasury Department says an even greater share of the costs are borne by the wealthiest households, with more than 80 percent of the burden on the top 0.1 percent.

Because state income taxes — including California’s 13.3 percent top rate — typically apply to capital gains, the combined rates for some taxpayers may exceed 60 percent.

This makes the use of CRT`s, Nimcruts and other charitable planning very hot planning topics again after the rise in the death Tax limits left some advisors thinking that the “Estate Planning Industry” was wounded beyond repair…clearly its not!

The sale of Life Insurance inside “ILIT`s” will grow largely again to replace the assets used in Tax plays, if this passes as submitted.

The Tax What if Doctor;-)

How do you find the time to stay active on social media during tax season? There are many tools to help you schedule content on Twitter & LinkedIn. Free tools such as TweetDeck are reasonably easy to set up and manage. If you dont mind spending a few dollars, you may consider a more robust paid option. Whether you choose a free or pay service, these scheduling tools are big time savers!

Big thing is set aside the time  to schedule your content to publish throughout the week. This ensures you have a steady stream of information going out to your followers and fans on busy days.

Additionally, you can download the mobile app for all of your favorite social networks to stay up to date while you are on the go or waiting for your next client to arrive.

You may find yourself stuck on a problem or just in need of a place to chat with a CPAs, EA or other industry expert who know what you are going through or reach out to friends and followers; they are a captive audience interested in engaging with you.

Hopefully we will capture you’re interest and you will read these blogs that are here to give you best practices.

The Tax What if Doctor;-)