Easy ways to save money

We are midway through the year.  Before you know it, it will be holiday season.  Now is a good time to like at your expenses to find ways to cut them down and save money.

  1. Know your expenses. Keep track of all of your expenses from the fixed expenses like your mortgage to the variable expenses i.e., coffee, gas, groceries and recreation.
  2. Once you have an idea of what you spend in a month, you can begin to organize your expenses into a workable budget. Your budget should outline how your expenses measure up to your income—so you can plan your spending and limit overspending. In addition to your monthly expenses, be sure to factor in expenses that occur regularly but not every month, such as car maintenance.
  3. Set a savings goal. One of the best ways to save money is to set a goal. Start by thinking of what you might want to save for—anything from a down payment for a house to a vacation—then figure out how long it might take you to save for it.
  4. Set priorties. After expenses and income, goals will have the largest impact on your money.  Set both long term and short term goals.  For example: 

                  Short term goals (1-3 years);Emergency fund (3-9 months of living expenses), vacation, down   payment for a car.

                  Long term goals (4+ years); Retirement, Children’s education

Finance Tips for Business Owners

According to Eric Siu, CEO of Single Grain and Founder, Growth Everywhere, there are 5 major financial tips every business owner should adopt:

  1. Don’t’ Procrastinate. Time is money.  Procrastinating on getting your accounting work is bad for your business.  Your bookkeeping needs don’t go away they just increase and before you know it you’ll have a big mess to dig yourself out of. Siu suggests breaking everything down into small categories and tackling them invoice by invoice, category by category. You won’t become overwhelmed and are more likely to keep up with the pace.
  2. Know your sales cycles. Do you have a steady stream of sales or are you impacted by seasonal sales spikes and slowing conversions after the season is over.  For instance, a business-to-consumer retailer that sells $20 items, sales cycle is likely fast enough that having a cash buffer on hand is less of a concern. But a business-to-business company whose sales cycles last months, or even years, having a three – to – four month cash cushion can mean the difference between being able to weather the long periods before revenue from past sales arrive and having to fold early because your cash has dried up.
  3. Ask for discounts. This one is self-explanatory.  The more you can save on costs the better. 

Travel Season is here

Spring is here and with the warm weather comes vacation.  Nothing could ruin a vacation more than a financial mishap while traveling.  Here are a few tips to ensure the fun, relaxing vacation we all desire.

  1. Clean your wallet. Only take necessary cards and information.
  2. Use credit cards for major purchases.
  3. Take a backup credit or debit card.
  4. Beware of fake ATM’s or ATM’s compromised with spy ware.
  5. Make copies of important financial information to take with you.
  6. Inform the bank and credit card companies of your coming travel plans.
  7. Use the hotel safe.
  8. Protect your cash.
  9. Watch out for crowds and pickpockets and purse snatchers.
  10. Stay Organized
  11. Research foreign destinations using multiple resources before travel.
  12. Keep watch of your spending and hold onto receipt purchases.

When traveling for business www.entrepreneur.com suggests the following to save money and stay safe:

  1. Fly with just one airline or book one hotel chain.
  2. Travel with only carry-on luggage.
  3. Use Uber.
  4. Find alternatives to hotels (Airbnb for example).
  5. Be flexible with your dates; staying an extra day or two can drop airline and hotel prices significantly.
  6. Use coupon sites such as, RetailMeNot, Expedia, etc.
  7. Don’t pay with cash.
  8. Ask locals for restaurant suggestions.
  9. Know your travel deductions.
  10. Find alternatives to traveling like Skype, Hangouts and GoToMeeting and have virtual meetings.

Spring Paperwork Clean up

As we bounce into spring here is one important step you can take to clean your financial House.

Know how long to keep paperwork

Here’s what to keep, and for how long:

Copies of your tax returns. Keep these forever. “They help in preparing future tax returns and making computations if you file an amended return.

Supporting tax documents and receipts. The IRS recommends keeping supporting documents for as long as you can be audited or held responsible for the filings. Here are a few rules of thumb:

  • The IRS generally audits taxes back three years, so keep records supporting deductions at least three years after a return was due or filed. However, the IRS also says: “If we identify a substantial error, we may add additional years. We usually don’t go back more than the last six years.” So you may want to hold onto records for six years to be sure you’re covered.
  • Keep payroll tax records six years.
  • If you filed a fraudulent tax return, you’re on the hook forever, so hold onto supporting documents.
  • If you failed to report income worth more than 25 percent of the gross amount you reported, you’re liable to the IRS for six years.

2018 Tax Brackets

What the 2018 tax brackets, standard deductions look like under tax reform

2018 Income Tax Brackets:

Old Rate New Rate Individuals Married Filing Jointly
10% 10% Up to $9,525 Up to $19,050
15% 12% $9,526 to $38,700 $19,051 to $77,400
25% 22% 38,701 to $82,500 $77,401 to $165,000
28% 24% $82,501 to $157,500 $165,001 to $315,000
33% 32% $157,501 to $200,000 $315,001 to $400,000
35% 35% $200,001 to $500,000 $400,001 to $600,000
39.6% 37% over $500,000 over $600,000

 

  • Capital Gains – Capital gain rates remain the same as 2017 at 0%, 15% and 20%. However because of the changes in individual tax rates the 2018 thresholds have changed. For 2018, the 0% rate is for taxable income up to $77.200 for married filing jointly, 15% for taxable income between $77,201 and $479,000 and the 20% for taxable income greater than $479,001.

 

Standard Deduction Increased:

For tax years beginning after 12/31/17 and before 1/1/2026, the standard deduction is increased to:

 

Old Rate New Rate  
$12, 700 $24,000 Married Filing jointly
$9,350 $18,000 Head of Household
$6,350 $12,000 All other taxpayers

The 2015 tax extenders legislation — the PATH Act — what is this?

On December 18, the Senate passed the Protecting Americans from Tax Hikes Act of 2015 (the PATH Act). Many popular tax breaks had expired December 31, 2014, so for them to be available for 2015, Congress had to pass legislation extending them. But the PATH Act does more than that. I am here to explain to you all of the benefits this Act has, the drawbacks, and how this applies to you.

Instead of extending breaks for just a year or two, the PATH Act makes many popular breaks permanent and extends others for several years. The PATH Act also enhances certain breaks and puts a moratorium on the Affordable Care Act’s controversial medical device excise tax.

Many of the PATH Act’s provisions provide an opportunity for taxpayers to enjoy significant tax savings on their 2015 income tax returns — but quick action may be needed to take advantage of some of them. The breaks made permanent and the extenders through 2019 all have ramifications on individual and businesses alike.

Some highlights include:

  • IRA distributions to charity
  • Deduction for certain expenses of elementary and secondary school teachers
  • State and local sales tax deduction
  • Small business stock gains exclusion
  • Enhanced child credit

These are just a few of the breaks and extensions in this Act. In order to capitalize on all of the advantages or shelter yourself from the negatives it is important that you sit down with an accountant to learn more. At Doherty & Associates we always say, “We bring peace of mind to your bottom line” but we also keep YOUR money where it belongs, with YOU!

Debbie Doherty

Debbie is Founder and President of Doherty & Associates

Tender Hearts Participates in 7th Annual Delaware Mud Run

Tender Hearts is proud to participate in the Seventh Annual Delaware Mud Run to support Leukemia Research. This team is going down and dirty in the mud to help raise money for cancer warriors. Get yourself on board by supporting this team! We appreciate your support!

Date: Sunday September 20, 2015
Location: Frightland - Middletown, DE

Learn More: https://www.elleevance.com/DEMudRun2015/teamlanding.aspx?teamidc=2006

In Memory of Nelson R. Talbott

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Can’t Pay Your Tax Balance?

Can’t Pay Your Tax Balance?

Your just received you tax return and can’t pay the balance due in full. What do you do?

  • FILE YOUR RETURN ON TIME.  This avoids the penalties for late filing.
  • RESPOND TO ALL NOTICES.  “Do Not” ignore the taxing authorities.
  • Pay as much as you can when you file the return.  The outstanding balance is subject to interest and late payment penalties.  Paying as much as you can will minimize these charges.
  • The IRS will give you up to an additional 120 days to pay in full.  Interest and penalties still continue to accrue.
  • If you can finance the full balance, the interest charged by your bank or credit card company is usually less than the combination of interest and late payment penalties.
  • You can enter into an installment agreement with the IRS and state taxing authorities.  There is a one-time user fee to set up the IRS installment agreement.  The installment payments can be made by a variety of methods:

o   Direct debit from your bank account;

    • Payroll deduction from your employer;
    • Payment via check or money order;
    • Payment by Electronic Federal Tax Payment System;
    • Payment by credit card via phone or Internet; or
    • Payment by Online Payment Agreement.
  • If your liability cannot be satisfied through any of the methods listed above. You may, repeat may, be eligible for an Offer in Compromise due to doubt as to collectability if your assets and income are less than the full amount of tax liability.  The IRS is stingy in accepting Offers in Compromise, and as such; they should be viewed as a last resort.

 

As always, this is only meant as a brief overview.  If you feel that we can be of further assistance to you, please contact our office to set up an appointment.

Email us at: info@dohertyandassociates.com

Call us at: 302-239-3500

Visit our website: http://www.dohertyandassociates.com

- Doherty & Associates Team

Traditional Individual Retirement Accounts (IRA’s)

Traditional Individual Retirement Accounts (IRA’s)

Who can contribute?

You can open and contribute to a traditional IRA if:

  • You have taxable compensation, and
  • Are under age 70½ at the end of the year

Taxable compensation is generally what you earn from working. This includes wages, salaries, tips, income from self-employment, and other amounts received for your personal services.   Compensation also includes taxable alimony.

How much can I contribute?

The maximum contribution for 2014 is the lesser of $5,500 ($6,500 if you are 50 or older at the end of the tax year) or the amount of your taxable compensation.

When can I contribute?

Contributions must be made by the due date of your tax return, not including extensions. This is usually April 15th.

How much can I deduct?

The amount that you can deduct is based on whether or not you and/or you spouse are covered by a retirement plan where you work.

  • If neither you nor your spouse is covered at work, you can deduct the lesser of $5,500 ($6,500 if you are 50 or older at the end of the tax year) or the amount of your taxable compensation.  The maximum deduction for a married couple is $13,000.
  • If you are single, head of household or married filing separate and did not live with your spouse at any time during the year and covered at work, your allowable deduction begins to phase out when your modified adjusted gross income reaches $59,000.  Once your modified adjusted gross income exceeds $69,000, you are not allowed a deduction.
  • If you are married filing a joint return and both of you are covered at work, your allowable deduction begins to phase out when your modified adjusted gross income reaches $95,000.  Once your modified adjusted gross income exceeds $115,000, you are not allowed a deduction.
  • If you are married filing a joint return, and only one of you is covered at work, your allowable deduction begins to phase out when your modified adjusted gross income reaches $178,000.  Once your modified adjusted gross income exceeds $188,000, you are not allowed a deduction.
  • If you are married filing a separate return and did not live with your spouse at any time during the year and covered at work, your deduction completely phases out when your modified adjusted gross income reaches $10,000.

Can I make nondeductible contributions?

If any or all of your contributions exceed the deductible amount based on the limitations discussed above, these contributions can be designated as nondeductible contributions. This will make a portion of your future distributions nontaxable.  In order to designate these contributions as nondeductible, you must file form 8606.  In certain circumstances, if your income is too high to deduct a traditional IRA or to contribute to a Roth IRA, the use of nondeductible IRA can be a useful planning tool.

As always, this is only meant as a brief overview.  If you feel that we can be of further assistance to you, please contact our office to set up an appointment.

Email us at: info@dohertyandassociates.com

Call us at: 302-239-3500

Visit our website: http://www.dohertyandassociates.com

- Doherty & Associates Team