Month: August 2018

Tax

Some Veterans Eligible for Refunds from Overpayment

Certain veterans who received disability severance payments after January 17, 1991, and included that payment as income that they should file Form 1040X, Amended U.S. Individual Income Tax Return, to claim a credit or refund of the overpayment attributable to the disability severance payment. The refund is the result of the Combat-Injured Veterans Tax Fairness Act passed in 2016.

Most veterans who received a one-time lump-sum disability severance payment when they separated from their military service will receive a letter from the Department of Defense with information explaining how to claim tax refunds they are entitled to; the letters include an explanation of a simplified method for making the claim.

The amount of time for claiming these tax refunds is limited; however, the law grants veterans an alternative timeframe of one year from the date of the letter from DoD. Veterans making these claims have the normal limitations period for claiming a refund or one year from the date of their letter from the DoD, whichever expires later. As taxpayers can usually only claim tax refunds within 3 years from the due date of the return, this alternative time frame is especially important since some of the claims may be for refunds of taxes paid as far back as 1991.

Veterans can submit a claim based on the actual amount of their disability severance payment by completing Form 1040X and carefully following the instructions. There is also a simplified method where veterans can instead choose to claim a standard refund amount based on the calendar year (i.e., an individual’s tax year) in which they received the severance payment. Claiming the standard refund amount is the easiest way for veterans to claim a refund because they do not need to access the original tax return from the year of their lump-sum disability severance payment.

Veterans eligible for a refund who did not receive a letter from DoD may still file Form 1040X to claim a refund but must include additional documentation to verify the disability severance payment. Veterans who did not receive the DoD letter and who do not have the required documentation showing the exact amount of and reason for their disability severance payment will need to obtain the necessary proof by contacting the Defense Finance and Accounting Services (DFAS).

Please contact the office if you need additional information or assistance filing Form 1040X.

Accounting Business

Good Recordkeeping Benefits your Business

Avoid headaches at tax time by keeping track of your receipts and other records throughout the year. Whether you use an excel spreadsheet, an app, an online system or keep your receipts organized in a folding file organized by month, good record-keeping will help you remember the various transactions you made during the year.

Records help you document the deductions you’ve claimed on your return. You’ll need this documentation should the IRS select your return for audit. Normally, tax records should be kept for three years, but some documents – such as records relating to a home purchase or sale, stock transactions, IRA, and business or rental property – should be kept longer.

In most cases, the IRS does not require you to keep records in any special manner. Generally speaking, however, you should keep any and all documents that may have an impact on your federal tax return including but not limited to:

  • Bills
  • Credit card and other receipts
  • Invoices
  • Mileage logs
  • Canceled, imaged, or substitute checks or any other proof of payment
  • Any other records to support deductions or credits you claim on your return

Good record-keeping throughout the year saves you time and effort at tax time. For more information on what kinds of records you should keep or assistance in setting up a recordkeeping system that works for you, please call the office.

Financial Planning Retirement

Retirement Saving Tips

Though it’s never too late to start, the sooner you begin saving, the more time your money has to grow. Gains each year build on the prior year’s gains–that’s the power of compounding–and the best way to accumulate wealth.

  1. Set Realistic Goals.
    Project your retirement expenses based on your needs, not rules of thumb. Be honest about how you want to live in retirement and how much it will cost. Then calculate how much you must save to supplement Social Security and other sources of retirement income.
  2. A 401(k) Is One Of The Easiest And Best Ways To Save For Retirement.
    Contributing money to a 401(k) gives you an immediate tax deduction, tax-deferred growth on your savings, and — usually — a matching contribution from your company.
  3. An IRA Can Also Give Your Savings A Tax-Advantaged Boost.
    Like a 401(k), IRAs offer huge tax breaks. There are two types: a traditional IRA offers tax-deferred growth, meaning you pay taxes on your investment gains only when you make withdrawals, and, if you qualify, your contributions may be deductible; a Roth IRA, by contrast, doesn’t allow for deductible contributions but offers tax-free growth, meaning you owe no tax when you make withdrawals, but contributions are not deductible.
  4. Focus On Your Asset Allocation More Than On Individual Picks.
    How you divide your portfolio between stocks and bonds will have a big impact on your long-term returns.
  5. Stocks Are Best For Long-Term Growth.
    Stocks have the best chance of achieving high returns over long periods. A healthy dose will help ensure that your savings grows faster than inflation, increasing the purchasing power of your nest egg.
  6. Don’t Move Too Heavily Into Bonds, Even In Retirement.
    Many retirees stash most of their portfolio in bonds for the income. Unfortunately, over 10 to 15 years, inflation easily can erode the purchasing power of bonds’ interest payments.
  7. Making Tax-Efficient Withdrawals Can Stretch The Life Of Your Nest Egg.
    Once you’re retired, your assets can last several more years if you draw on money from taxable accounts first and let tax-advantaged accounts compound for as long as possible.
  8. Working Part-Time In Retirement Can Help In More Ways Than One.
    Working keeps you socially engaged and reduces the amount of your nest egg you must withdraw annually once you retire.
  9. Other Creative Ways To Get More Mileage Out Of Retirement Assets.
    You might consider relocating to an area with lower living expenses or transforming the equity in your home into income by taking out a reverse mortgage.
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