News About IRS And Tax

Saturday, 4 March 2017

How Much Can You Deduct for Self-Employed Expenses

Running your own business as a #SelfMade entrepreneur gives you the ability to make business decisions based on your own budget and priorities. You can decide where you’d like to work, even if it’s at home in your own office...

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source http://blog.turbotax.intuit.com/self-employed/how-much-can-you-deduct-for-self-employed-expenses-30166/

Friday, 3 March 2017

NerdWallet Survey: You May Be Missing Out on Free Filing

More than 1 in 3 taxpayers making less than $50,000 a year paid for a tax preparation professional or company last year even though they may have qualified for free tax software filing, a recent NerdWallet survey showed. At TurboTax, we say “Why pay when...

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source http://blog.turbotax.intuit.com/tax-news/nerdwallet-survey-you-may-be-missing-out-on-free-filing-30147/

Weekend Reading for Financial Planners (Mar 4-5)

Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the details of the latest proposal to delay the DoL fiduciary rule by 60 days… which is shorter than the prior rumors that there would be a 180-day delay, and notably, is still only a proposal, that has to go through a public comment period and could take another month to be affirmed (which means a prospective delay in the April 10th applicability date may truly come down to the wire!).

Also in the news this week were a number of additional big announcements, including: a pricing war that erupted between Fidelity, Schwab, and TD Ameritrade, with each firm “voluntarily” imposing upon itself a 29%+ price cut in the cost to execute stock and ETF trades (down to $4.95 – $6.95 per trade); new guidance from the SEC on Standing Letters of Authorization (SLOA) and when they do and do not trigger custody or surprise audit requirements; an indication from the SEC that it may get more aggressive on trying to roll back the Accredited Investor requirements for private placements (kicking off a debate about whether limiting access to private placements is “unfair” to less affluent consumers who want to take some investment risks, or whether the bar to determine “financial sophistication” to invest in such opportunities should actually be higher); and a look at how the IRS is shifting its audit resources to increasingly focus on those with ultra-high incomes (e.g., $1,000,000+), in addition to doing far more correspondence-mail-based “lite audits” to ask for proof substantiating questionable line-item credits or deductions.

From there, we have a few more technical articles on financial planning topics, from a look at using Funded Ratios to evaluate retirement readiness, to how today’s low-return environment can drastically increase the amount of savings prospective retirees need (or how much accumulators must save to get there), the important differences between arithmetic and geometric means (and how to calculate them), and new IRS guidance to 401(k) plans on hardship withdrawals that some fear will make it even easier for people to take advantage of the rules by simply being able to “self-attest” that they really had a hardship (and gamble that they won’t be audited later to prove otherwise).

We wrap up with three interesting articles about supporting the success of younger financial advisors, including: ways to grow the financial planning talent pool, given that even with its recent growth, only about 6% of all four-year degree-granting institutions have a CFP Board registered program; career path advice for young financial planners trying to figure out how to put the right foot forward and get ahead (even while still a student); and a look at how just as financial success entails making investments for your future, advancing your financial planning career involves making investments into yourself, from advancing your formal and informal education (from CFP studies to post-CFP designations to reading books and industry news) to being certain that your own financial house is in order (both to ensure that you “practice what you preach” as a financial advisor, and because your personal financial stability is important if you want the flexibility to make job changes or someday launch your own advisory firm!).

Enjoy the “light” reading!

Thursday, 2 March 2017

What Does an IPO Mean for Employee Taxes?

Snapchat (SNAP) went pubic today with its Initial Public Offering (IPO) on the New York Stock Exchange. An IPO is a big moment for many stakeholders in a company, including its own employees. When a company goes public, many employees get a...

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source http://blog.turbotax.intuit.com/income-and-investments/401k-ira-stocks/what-does-an-ipo-mean-for-employee-taxes-30159/

10 Commonly Overlooked Tax Deductions

April brings showers, flowers…and taxes! You have a little over a month to go before the tax filing deadline, and if you’re in need of motivation, we have 10 money-saving tax deductions (and credits) to keep in mind. They just might motivate...

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source http://blog.turbotax.intuit.com/tax-deductions-and-credits-2/10-commonly-overlooked-tax-deductions-19501/

How To Transition Existing Clients To An Associate Advisor

Even with today’s technology tools, an individual financial advisor can only handle “so many” client relationships, until it’s just too many people to meet with, and too many people to keep straight in your head. At some point, every financial advisor hits a wall, where it’s necessary to either stop taking on clients altogether, or hire another advisor and begin transitioning some existing clients to free up room to accept more clients. Yet in a business that’s built on the foundation of the advisor-client relationship, the actual process of transitioning clients to another advisor can be daunting!

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we discuss how to transition existing clients away from a senior advisor to a new/associate advisor, and best practices to maximize the odds that the transition is successful and goes smoothly.

Fortunately, if the need to transition clients isn’t due to an urgent sale, but simply as a part of the natural growth process of the business, there’s time to train and develop an associate advisor, and shift clients over time. Which helps to ensure a smooth process for all involved. My recommendation is that advisors plan to handle the transition as a 3-year process, made up of 3 different steps that I call the three L’s: Listen, Learn, and Lead.

During the first phase – the listening stage – the responsibility of the associate is simply to listen. They’ll gain valuable knowledge as they watch the senior advisor handle the meeting, direct the conversation, and explain common topics and talking points that come up. During the second year of the transition – the learning stage – it’s time for the associate advisor to start talking more in the meetings. Since they have presumably completed their CFP education, they should know their information (even if they don’t have a lot of experience delivering it yet), which means the senior advisor can steer client questions to the junior advisor to answer (and then give coaching feedback in a post-meeting “check-in”). Finally, in the third year of the transition – the leading stage – the associate advisor is promoted to a “full” advisor and actually begins to lead the meeting. They set the agenda, kick off the conversation, go through the talking points in each area with the client, and ultimately wrap up the meeting. The job of the senior advisor is to sit and observe – only intervening if it is absolutely necessary, and otherwise giving further coaching feedback after the meeting is over.

This last point is crucial, because undermining the trust the clients are developing with the associate can destroy the transition at this point. If the clients direct a question to the senior advisor, the senior advisor should steer it back to the associate. If the clients ask for the senior advisor’s opinion, the senior advisor should affirm the opinion of the associate. And being open and honest with the clients about the transition (in year 3!) is the best way to help the associate advisor ultimately succeed, because it’s one more clear affirmation from the senior advisor to the clients of the senior advisor’s trust in the associate and the transition. Notably, this also means the senior advisor should be careful to not unintentionally undermine the associate. Beware jokes about an associate advisor’s age, and don’t call them a “junior” advisor (literally, use “associate” and not “junior”), because these both highlight the associate’s relative lack of experience and can reduce client trust.

Ultimately, the biggest determinant of whether clients accept being transitioned to a new associate advisor is whether the existing senior advisor convinces them that the associate advisor really does have the capabilities and expertise to be a good advisor for them! Which sounds easier than it is to convey – because as the senior advisor, you may find yourself feeling very uncomfortable when clients actually do begin to transition, and it becomes clear that they don’t actually need you after all. Which is a positive for the business, but can be a personal blow to the ego!

In the end, the reality is that some clients may still resist the transition, and in that case the advisor has to make a business decision to keep them (if the revenue and/or assets merit it), or acknowledge that the client is no longer a good fit and let them go. The fact that you agreed to be their advisor at the beginning does not commit you to being their advisor forever! If you want to grow your business, you have to do what’s right for the business.

Wednesday, 1 March 2017

On The Bleeding Edge Of Financial Planning Fee-For-Service Regulation

When we first launched the XY Planning Network in 2014, our vision was to expand access to financial planning for Gen X and Gen Y clients by championing a new financial advisor business model: getting paid for financial advice through an ongoing monthly retainer. A topic about which my co-founder Alan Moore and I literally wrote the book last year.

When we launched, we knew we would be at the cutting edge – or even the bleeding edge – of how financial advisors will get paid for financial planning in the future. What we didn’t know, however, is that we’d also find ourselves at the bleeding edge of regulation over how financial advisors are compensated for fee-for-service advice as well.

Because what we’ve learned in the 3 years since is that the word “retainer”, while relatively straightforward as an explanation to consumers of how services will be paid for – raises significant regulatory concerns. In some cases, we think the concerns are justified; while we’re confident on the value proposition of an XY Planning Network advisor to validate their ongoing cost, there will someday come a day where financial advisors begin to charge monthly retainers but don’t actually do any real work for clients. At that point, consumers become exposed to a new form of “reverse churning”, where similar to abusive AUM fees, the advisor might charge on ongoing fee (or even try to lock clients into an ongoing fee) but not actually provide any ongoing value.

Fortunately, the reality is that with a model like monthly retainers in particular, consumer risk is largely ameliorated by the fact that substantial fees aren’t actually being prepaid in advance (unlike a traditional long-term retainer arrangement); instead, consumers generally have the ability to terminate the advisor at any time, and immediately end what is effectively an ongoing monthly subscription fee they were paying to the advisor. Which is far better than paying an annual retainer fee, and then discovering one month later that the advisor is shutting his/her doors, and that the other 11 months of fees have been forfeited.

Nonetheless, even when paying on a monthly basis, there are still valid regulatory concerns about whether consumers will be protected. Should advisors be allowed to create longer-term retainer fee agreements as well? What kinds of notifications are necessary to ensure consumers are aware of and remember what they’re paying, which in turn helps to ensure the advisor remains held accountable for service and value? What needs to be done to ensure fee billing and the potential access to bank account or credit card numbers that may entail, doesn’t trigger custody of client assets? And how should regulators (and consumers) evaluate whether a fee is “reasonable”, particularly if it is primarily for non-investment purposes and bears no relationship to the size of investment portfolios?

The added complication is that because financial-planning-centric advisors may not manage portfolios at all, they will in practice be regulated predominantly by state securities regulators, which we’ve found over the past several years have quite varying views about the safety (or not) of charging consumers non-AUM fees (and in some cases, different opinions from different regulators in the same state!). In other words, there is little uniformity regarding the above regulatory issues about fee-for-service financial planning from one state regulator to the next. Accordingly, to the extent that the monthly retainer and other fee-for-service financial planning models are gaining momentum, perhaps it’s time for NASAA to consider a Model Rule that sets forth best practices in reasonable regulation and oversight of these new financial advisor business models?