Are you looking forward to your tax refund? By now you know how much you'll be getting and approximately when the cash will land in your bank account. The only question is, what's the best way to put the money to work for you?
Here are two tax-smart ideas.
If you let the new business failure rate be your guide, you might never start your own company. Only 50 percent survive the first four or five years. Many former business owners who returned to a less-than-satisfying 8 to 5 job might tell you that their business hit the rocks when it ran out of cash. Of course, many factors can contribute to business failure. But an owner's inability to manage cash effectively — whether from neglect, lack of skill or inability to restrain spending — is a sure harbinger of trouble.
But don't the income statement and balance sheet provide a complete picture of the company's financial viability? Not necessarily. For example, your company's net worth may be climbing year after year, while cash balances are being depleted. Or, your business property is appreciating in value and your accounts receivable are increasing. Both contribute to a positive net worth, yet neither bolsters your bank account directly.
From an April 10, 2017, post on Accounting Today online
The traditional family is no longer so traditional. Increasingly children are living in blended families, bringing complex tax issues to their parents’ accountants.
“According to the IRS, everybody fits in a biological family: two parents who are married, 2.3 biological children, and that’s it. They file jointly, and you sign your name,” said Jane King, who runs the firm Fairfield Financial Advisors with her daughter Caroline Hedges, in Wellesley, Mass. “Now there are so many different models, whether it’s grandparents raising children, or people who are together and have children, but are not married, or people who are divorced, and there’s joint custody, with two nights at one house and three at another. It’s confusing for accountants and for people who are in nontraditional situations or relationships to figure out what to do.”
After you file your tax return, the last thing you want to see is a notice from the IRS questioning your return. Some IRS notices involve very minor changes, like a correction to a Social Security number. Some are for serious changes that could involve a lot of money, such as a billing for more taxes, interest, or penalties due for an adjustment to your total tax liability.
So, what should you do if you get a letter from the IRS? Here is a list of do's and don'ts.
Diversifying your investments involves spreading your risks by investing in a variety of asset classes such as stocks, bonds, commodities, and real estate. But with a changing tax landscape, you might consider three more classes: taxable, tax-deferred, and tax-free.
Years ago, taxpayers often worked under the assumption that their tax bracket would be lower after they retire. Therefore, a common strategy was to defer as much taxable income as possible to the golden years. Now, however, with the possibility of higher tax rates in the future, it could be more efficient to pay those taxes today while rates remain lower. Since no one knows for sure what Washington will do, it might be time to hedge your tax risk and allocate your portfolio between accounts with differing tax consequences.
Each year the IRS produces its "Dirty Dozen" list of tax scams. As criminals become savvier at stealing personal information and scamming people out of their money, taxpayers must be more vigilant than ever. Here are some of the more common scams you may encounter.
Identity theft. The IRS continues to receive fraudulent returns filed with someone else's social security number each year. While the agency is making progress in finding and prosecuting these criminals, taxpayers must be extremely cautious with their personal information to avoid becoming a victim.