News About IRS And Tax

Friday, 24 August 2018

Is a Dog Your Tax Refund’s Best Friend?

National Dog Day is the perfect day to reflect on all of the fantastic benefits, responsibilities, and fun that come with being a dog owner. Taking care of a dog can be an incredibly rewarding experience. The love and affection you receive...

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source https://blog.turbotax.intuit.com/tax-deductions-and-credits-2/is-a-dog-your-tax-refunds-best-friend-24028/

Weekend Reading for Financial Planners (August 25-26)

Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with news about the latest IRS regulations that definitively close the door on the potential for individuals in high-tax-rate states to preserve their SALT deductions by converting them into charitable deductions to state-run charities instead, as the Service declares that donating to a state-run charity in exchange for a state tax credit amounts to a quid-pro-quo transaction that would reduce the deductible amount of the charitable contribution all the way to $0. Also in the news this week, though, was a look at what kinds of tax policy changes the Democrats might take up and propose in 2019, including repealing the SALT cap, if they are in fact able to retake control of Congress in the mid-term elections this fall.

Also in the news this week were a number of interesting articles about the economy and markets, including a major revision from the Bureau of Economic Analysis to the personal savings rate data that reveals the U.S. consumer is actually saving at a whopping 7.2% rate that is well above 30-year averages (despite the fact that the so-called “wealth effect” normally decreases personal savings rates late in the economic growth cycle), the revelation that labor markets are becoming so tight that the mid-summer unemployment rate for 16-24-year-olds has dropped to a 52-year low, and a look at the recent buzz and President Trump’s proposal around changing quarterly earnings reports and guidance to become semi-annual (twice-per-year) instead and why if we really want to reduce the focus on earnings and market volatility the key is not to report earnings less often to instead to make the guidance more often (e.g., monthly or even daily through technology) so no one data point is ever so impactful anymore.

We also have several behavioral finance articles this week, from a look at what to do when clients don’t follow our advice (and why oftentimes clients aren’t actually looking for advice from their financial advisor about a major decision anyway, and really just want support for the decision they already made instead), to the importance of culture in determining whether advice is appropriate (or even relevant) for a client, why trying to imagine yourself in someone else’s shoes is actually a terrible way to understand their perspective (and how it’s far more effective to just ask them to share their perspective), and how managing clients so they don’t panic in a bear market isn’t just about dialing down the volatility in their portfolios so it doesn’t trigger any emotional fear in the first place but also looking at how we as advisors can create ‘circuit-breakers’ that help to prevent a volatile market event from translating all the way into an actual hasty and ill-timed action.

We wrap up with three interesting articles, all around the theme of balancing financial wealth and time: the first looks at how one the greatest challenges in wealth accumulation is that we think of wealth in terms of the outwardly expensive things that people own (fancy homes, cars, and jewelry) when in reality it’s the decision not to buy those things that are the greatest driver of wealth (which means wealth is best created by what we don’t see, not by what we do see!); the second explores the trade-offs between time and money, and how sometimes the best advice we can give is not about how to prudently save money, but how to prudently spend money in order to save time instead; and the last explores the reasons why very affluent individuals sometimes choose to remain anonymous and unseen with their wealth, preferring instead to be rich but not famous (an important mindset for advisors to understand about their clients)!

Enjoy the “light” reading!

Thursday, 23 August 2018

Which Work-Related Devices Can I Write Off?

You may have heard that the new tax reform law eliminates tax deductions for un-reimbursed employee business expenses beginning in 2018 (the taxes you file in 2019). If you own your own business, however, you can still deduct business expenses...

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source https://blog.turbotax.intuit.com/self-employed/expenses/which-work-related-devices-can-i-write-off-33164/

How The Dunning-Kruger Effect Holds Good Financial Advisors Back

The “Imposter Syndrome,” which affects professionals across industries and at every stage of their careers, is relatively common and refers to the tendency many have to doubt their own abilities and accomplishments, and results in the fear of being “found out” as a fraud (even if the reality is that they really are a bona fide expert!).

A lesser-known challenge that many professionals – particularly those in fields where their interactions with clients can result in life-altering consequences – run up against after they’ve got some education and experience under their belts is the realization that, despite what they’ve already learned, there’s an ocean of knowledge and expertise between where they are where they feel they need to be to best serve their clients. Which similarly can result in a decrease in confidence even as their actual skill to serve clients is objectively increasing.

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1 PM EST broadcast via Periscope, we discuss this phenomenon, called the Dunning-Kruger Effect, how it manifests itself (particularly for financial advisors with a few years of experience as they earn their CFP certification), and specific steps advisors can take to ameliorate feelings of inadequacy and (re)gain the confidence needed to serve clients effectively.

The first, and probably most important, step in dealing with the Dunning-Kruger effect is to realize that, simply by gaining some financial planning knowledge – much less earning CFP certification – you really are already far ahead of the knowledge curve relative to virtually every client or prospect you’ll ever meet, with more than enough expertise to add real value to clients.

Second is understanding that there’s nothing wrong with double-checking your work anyway – just to be safe – or even asking for a second opinion from more experienced advisors. Similarly, there’s absolutely nothing wrong with telling a client that you need more time to research a complex topic before providing an answer, just to be certain you really have considered all the issues.

From there, the best way to overcome the Dunning-Kruger effect is simply furthering your education by obtaining additional certifications and become a truly confident expert, establish a niche or mini-specialization that makes it easier to achieve mastery by narrowing the required scope of expertise in the first place, and focus on succeeding with clients who have less-complex financial circumstances before moving up the proverbial food chain of more affluent clients. Of course, it’s also helpful to simply stay flexible with the advice you give to clients in the first place… managing expectations to make it clear that the future can and will change, and that decisions don’t need to be viewed as irrevocable in the first place (because most aren’t!).

The bottom line, though, is simply to understand that you aren’t as ignorant as you may feel with the realization that there is so much to learn and consider in giving advice to clients, and that by taking steps to further your skills and knowledge, you can actively deal with the Dunning-Kruger effect and be the confident professional your clients are looking for.
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source https://www.kitces.com/blog/dunning-kruger-effect-financial-advisor-confidence-experience-expertise-competency-mastery/

Wednesday, 22 August 2018

Proposed Regulations Refine Definitions For Specified Service Businesses Eligible For QBI Deduction

While much of the Tax Cuts and Jobs Act of 2017 was focused on individual and corporate tax reform and simplification, one of the biggest new planning opportunities that emerged was the creation of a new 20% tax deduction for “Qualified Business Income” (QBI) of a pass-through entity, intended to provide a tax boon to small businesses that would leave more profits with the business to help it grow and hire.

The caveat, however, is that the QBI deduction was only intended to provide tax benefits for profitable businesses that hire employees, not to provide tax benefits for high-income professions who generate their profits directly from their own personal labors. As a result, the new IRC Section 199A created a so-called “Specified Service Business” classification that, at higher income levels, would not be eligible for the QBI deduction.

The challenge, however, is that the exact definition of what constituted a “Specified Service Trade or Business” (SSTB) was not always clear, given the wide range of professional services that exist in the marketplace. In addition, as soon as the rules themselves were released, creative tax planners began to strategize about how to arrange (or re-arrange) revenue and profits to maximize the amount of income eligible for the QBI deduction and minimize exposure to the Specified Service Business rules.

In this guest post, Jeffrey Levine of BluePrint Wealth Alliance, and our Director of Advisor Education for Kitces.com, examines the latest IRS Proposed Regulations for Section 199A, which provides both important clarity to how the “Specified Service Business” test will apply in various industries, including rather broadly for professions like health, law, and accounting, but only narrowly to high-profile celebrities who may have their endorsements and paid appearances treated as specified service income but not the income from their other businesses that may still materially benefit from their high-profile reputation.

Of greater significance for many small business owners, though, are new rules that will force businesses with even just modest specified service income to treat the entire entity as an SSTB, limit the ability of specified service businesses to “carve off” their non-SSTB income into a separate entity, and in many cases aggregate together multiple commonly owned SSTB and non-SSTB business for tax purposes.

Ultimately, the new rules are only impactful for the subset of small business owners who engage in specified service business activities and have enough taxable income to meet the thresholds where the phaseout of the QBI deduction begins (which is $157,500 for individuals and $315,000 for married couples). Nonetheless, for that subset of high-income business owners, effective planning to avoid having SSTBs “taint” non-SSTB income, or to split off non-SSTB income to the extent possible, will be more challenging than before.

Tuesday, 21 August 2018

Tax Benefits for Having Dependents

Kids can be overwhelming when they are cooped up in the house while on break, but they are also blessed tax-savers when you file your taxes. Here are some of the tax benefits for having children and other dependents.

source https://blog.turbotax.intuit.com/tax-deductions-and-credits-2/family/tax-benefits-for-having-dependents-12835/

#FASuccess Ep 086: Mastering Marketing As A Solo Advisor By Simply Sharing Your Authentic Self with Eric Roberge

Welcome, everyone. Welcome to the 86th episode of the “Financial Advisor Success” podcast. My guest on today’s podcast is Eric Roberge. Eric is the founder of Beyond Your Hammock, an independent RAA based in the Boston area that specializes in financial planning services for high income young professionals in their 30s and 40s. What’s unique about Eric though is the way that he’s quickly propelled his advisory firm to $300,000 of revenue from scratch in just five years, with a marketing approach of talking about what he does personally in his own financial lifestyle and attracting prospective clients to him who want to live the same way.

In this episode, we talk in-depth about Eric’s marketing process, from why he’s decided to abandon the standard approach of trying to make neutral statements in the media and always saying it depends, and instead, showing the financial decisions he actually makes. To how he’s published articles to share publicly about those financial decisions, including how much he spent on his recent marriage and why he’s chosen to rent instead of buy a home living in Boston. How Eric deals with the criticism that often comes back when you make such strong statements in public. And why Eric finds that this kind of marketing is the ultimate differentiator, because anyone can write technical articles, but only you can write about your beliefs to attract prospective clients who share those beliefs.

We also talk about Eric’s advisory firm itself. From the financial planning process he uses and the way he uses eMoney Advisor to gather data before meeting with clients, to the way that he’s implemented a monthly retainer model with his clients, or as Eric puts it, an annual retainer payable monthly. Why Eric decided to add in a separate AUM service as well and what Eric went through to survive the early years of getting his practice to the point of generating $300,000 of revenue, including spending nearly six months waiting tables on the side to make ends meet while he was getting his advisory firm off the ground. And be certain to listen to the end where Eric talks about how he ultimately figured out the exact type of ideal client he wanted to serve as a way to build his own confidence in communicating his passion for financial planning to clients.

So whether you are interested in learning about how Eric grew Beyond Your Hammock to $300,000 in revenues in the first five years, about his unique approach to marketing to his target audience, or about his pricing model that allows him to charge effectively for a blended service model, then I hope you enjoy this episode of the Financial Advisor Success Podcast!