SHOW NOTES: 2018-02-08 Money in Motion

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Last Week’s Question of the Week: What percentage per year will your Social Security benefit grow if you wait till after your Full Retirement Age to begin collecting? ANSWER: Your benefit can increase up to 8% per year until you start taking benefits, or until you reach age 70.

HOST: Your topic today is some simple tax preparation tips for this year, and also, how to simplify your taxes for next year.

KLAAS FINANCIAL: We like to remind our listeners that first and foremost we are not accountants and for their own specific tax advice, they should seek out a tax professional. However, we do work with several and over the years we have accumulated some good practices to help our clients with.

  1. First idea (if you haven’t already done so) is to create a 2017 tax file to secure all of the W-2’s, 1099’s and other statements when they show up. At the same time, create one for 2018 to improve your processes for next year.
  2. The most common 1099’s are 1099-Div, and 1099-R (Distributions from pensions, annuities, retirement plans, IRA’s or Insurance Contracts) Other 1099’s are for independent contractor income, Social security income, government payments etc. Remember a lot of these statements may not come in the mail any longer, because more and more people have them available online. You can download them as soon as they become available.
  3. Make a list of what documents you are actually expecting- what are the deadlines that you can expect statements? Jan 31st for the IRA’s, Feb. 15th, March 15th etc.
  4. Figure out who will be doing your taxes? Are you going to prepare your own taxes with tax software, or hire a tax preparer, CPA etc.? Is this the year to make a change? I love how people worry so much about saving money on not hiring others to help with taxes, when often times they miss out on deductions that would have saved them even more money.
  5. Consider still contributing to your Traditional IRA or Roth IRA before you file (you have up to April 17th to contribute)

HOST: Does everyone HAVE TO file a tax return?

KLAAS FINANCIAL: Great question! There are situations where you don’t need to file. The IRS considers your age, your filing status and your income. If you didn’t have any income probably not, but it would be worth discussing with your tax preparer just to be sure. You don’t want to leave potential losses that you experienced on the table, that could be carried forward to another year.

For example, in 2017, if your gross income was at least $10,400+ and you are single, you do need to file.

Interesting fact: According to the Tax Policy Center think tank, 44.3% of tax filers back in 2016 owed no individual income tax or they had negative taxable income in 2016. So, the reality is that many people who file, actually pay no income tax today.

HOST: What if I want to use tax software like TurboTax, how will I know what forms to use?

KLAAS FINANCIAL: The tax software will ask for specific forms.

  1. If you receive an unexpected form after you have filed, then you will have to amend your return which will cost money, if you have an accountant doing this, so it is best to ensure that all your information is accurate and complete before you file your taxes.
  2. If you received income other than that from your employer over the last taxable year, then you will need to file a 1099 form.
  3. There are several different kinds of 1099 forms and they will be labeled differently. For example, if you worked as an independent contractor and earned more than $600 last year in rent or compensation, you will need to file a 1099. Concurrently, if you earned dividends and/or distributions from your stock portfolio last year, a 1099 (albeit a different type) will also be required.
  4. You will also need a 1099 if you received government payouts (like unemployment), made a withdrawal from a taxable retirement account, or if you had a debt cancellation.
  5. 1098 Forms for Interest Deductions: If you plan on claiming a deduction because of your mortgage interest, you will need form 1098 from your mortgage company. You can also student loan interest that you paid over the year. The company will issue you a 1098-E form.

HOST: What if I got divorced this year, or maybe even lost my spouse? Is there something different I need to do when I file my taxes?

KLAAS FINANCIAL: Yes, Changes in Your filing status are important.

  1. If you got married, divorced or lost a loved one, your status has changed. Did you have a child (tax deduction) or maybe one of your children is now out on their own? Can you still deduct for them? Remember this will affect their tax forms as well.
  2. Another good idea is to schedule an appointment with your accountant now for a future date when you think you will have all of your documents.

HOST: What if I need to file an extension for my taxes, what should I know?

KLAAS FINANCIAL: Be ready for an extension if necessary. Sometimes taxes are more complex than you expect.

  1. If you are unable to complete your 2017 federal tax return by the April deadline (April 17 in 2018) you’ll first need to file an extension with the IRS to avoid any potential late-filing or late payment penalties. Filing an extension will allow you to push your deadline back six months to October 15, 2018.
  2. It’s important to keep in mind an extension only pushes back the due date for the filing of your tax documents. It does not give you extra time to pay on any taxes you may owe. If you believe you will owe money this year, you’ll need to estimate the amount after filing for an extension and make a payment by the April deadline.

HOST: What are some other ideas for me to enhance my tax planning today?


  1. Simplify, Consolidating and Diversifying. One idea is to reduce the number of your accounts. We call this account clutter. If you have multiple accounts with the same titling, several IRA’s and old 401ks you should consider consolidating these accounts. Doing so will make it easier to see your true overall asset allocation mix. With fewer accounts you can keep track of websites, passwords and keep beneficiary designations up to date. After-tax accounts have to be looked at more carefully before combining, but perhaps taking a loss, or taking a gain may make sense for you this year.
  2. Another area to eradicate is credit clutter. Do you really need all those credit cards accounts? Do you have multiple loans such as student loans, car loans etc? Fewer accounts will protect yourself from possible identity theft.

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Catch C.J. Klaas and Maleeah Cuevas on Money in Motion every Thursday on Madison's 1310 WIBA from 8:05-8:35am.