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Legal Documents Most Americans Need

These documents will give your family guidance and comfort when they need it most.

POWERS

An advance directive or healthcare power of attorney is a legal document that provides loved ones and medical professionals a road map for your health care preferences should you ever be unable to make those decisions yourself. Appoint someone you trust to follow your wishes and give a copy to your hospital records department.

Similarly, a financial power of attorney gives someone you choose the authority to handle your finances when you are not able to do so yourself. Appoint a capable and responsible individual you trust and share your wishes with that person.

TRUST

A trust spares your heirs from the inconvenience and cost of probate. Instead, it allows for the rapid and private transfer of assets to your heirs.

WILL

A will is subject to probate, (reviewed by the court), which is public, and costs money and time. Consider attaching a list itemizing who is to receive any personal items not contained in your trust.

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When Should You Start Social Security Benefits

Before deciding to collect Social Security benefits, consider these tips to help you make an informed decision.

TIMING MATTERS

If you plan to continue working while receiving benefits, there are limits on how much you can earn each year between age 62 and full retirement age and still collect all your benefits However, once you reach full retirement age, your earnings do not affect your benefits, but they may be taxable as income.

And if you don’t need the income now, you may decide to wait beyond full retirement age to receive additional retirement credits. Or you can choose early retirement and invest your benefits elsewhere.

HEALTH INSURANCE

If you stop working, not only will you lose your paycheck, but you may also lose employer-provided health insurance. Although exceptions exist, most people will not be covered by Medicare until they reach age 65.

Your employer should be able to tell you if you will have health insurance benefits after you retire or if you are eligible for temporary continuation of health coverage. If your spouse is employed, you may be able to switch to their company’s health insurance.

ADDITIONAL BENEFITS

If you qualify for benefits as a widow, widower, or surviving divorced spouse, you may choose to apply for survivor’s benefits now and delay your retirement benefit until later.

If you delay receiving your retirement benefit until your full retirement age or later, your retirement benefit will be larger.

EXPECTATIONS

Consider your family history and lifestyle when thinking about your life expectancy. You may need extra money in later years if you come from a family with long life expectancies. This is particularly important as you could potentially outlive your retirement savings, especially any investments with limits on how long they are paid.

Your life expectancy affects your retirement planning decisions. Knowing this helps you determine whether you should start receiving reduced benefits at age 62 or wait until age 70 to receive a higher payment.

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Identity Protection Pin (IP) From the IRS

An IP PIN is a six-digit number that help prevent someone from filing a tax return using your Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN). The IP PIN is known only to you and the IRS and helps verify your identity when you file your tax return.

The IP PIN is valid for one year, so each January, you’ll need a newly-generated IP PIN. Most taxpayers can obtain an IP PIN by applying at IRS.gov/ getanippin. You must pass the identity proofing requirements. But if you can’t successfully validate your identity through online means, you may apply with Form 15227.

After you’re assigned an IP PIN, it must be entered accurately on electronic and paper tax returns to avoid rejection and delays.

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Tax Deductible Start-Up Costs

You’ll incur numerous costs to get your new business venture off the ground. But are all of them tax deductible? You may be surprised.

GETTING STARTED

Tax deductible business start-up costs include those incurred while creating an active trade or business and/or investigating the creation or acquisition of an active trade or business.

Start-up cost examples include:

  • Market surveys
  • Advertising for the opening of a business
  • Deposits on utilities or leased property
  • Website development

There are also organizational costs. These include expenses for organizing your company, state incorporation fees, and attorney fees to help with any of these tasks.

IRS WEIGHS IN

It’s important to separate these two expense groups. Generally, the IRS considers business start-up costs as capital expenses because they are used for a long time, rather than within the first year of doing business. So, you can’t designate all these costs as expenses to your business in the first year.

Business start-up costs are intangible assets (no physical form), so they must be amortized (spread out over 15 years, for example), beginning with the year your business begins.

THE FIRST YEAR IS UNIQUE

You can elect to deduct up to $5,000 of business start-up costs and $5,000 of organizational costs in the first year you are in business. But each $5,000 deduction is reduced dollar-for-dollar by the amount that your total start-up or organizational costs exceed $50,000. For example, if you incurred $53,000 of start-up or organizational costs in the first year, you could only deduct $2,000 in the first year ($5,000 – $3,000).

Keep organized records of all expenses you pay while starting your business for your tax professional.

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July 2023 Client Line Newsletter

Tax Deductible Start-Up Costs – are all start-up costs tax deductible.

Identity Protection Pin (IP) From the IRS – a six-digit number that helps prevent someone from filing a tax return using your social security number or individual taxpayer identification number.

When Should You Start Social Security Benefits – consider these tips to help you make an informed decision.

Legal Documents Most Americans Need – give your family guidance and comfort when they need it most.

July 2023 Client Profile

Long-Term Disability Insurance – are you insured.

July 2023 Question and Answer

Credit Scores – most credit score ranges are similar.

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Employee Payroll Deductions

Deductions from your staff’s pay are made at the employees’ discretion.

Voluntary deductions include things like 401 (k) contributions, health and disability insurance premiums. Secure written authorization from your employees for any voluntary deductions.

Have team members review their voluntary withholdings each year and make changes on a new authorization form.

Involuntary deductions include things like income tax, court-ordered garnishments, and FICA tax. While taxes are an automatic involuntary deduction, you should require a written court order supporting the amount and duration of the deduction for garnishments.

Keep all payroll forms in employees’ payroll files – separate from personnel files – for three years.

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The Shrinking Dollar

Inflation effectively makes every dollar worth less, which impacts your spending power. That is why it is important to position your investments so they outpace inflation. To see what inflation does to the value of your money, compare the increasing cost of a $1,000 purchase over the decades.

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June 2023 Question and Answer

QUESTION:

What is the U.S. debt ceiling?

ANSWER:

The debt ceiling is the maximum amount of money the United States can borrow cumulatively by issuing bonds.

If the national debt levels bump up against the ceiling, the Treasury Department must resort to other extraordinary measures to pay government obligations and expenditures until the ceiling is raised again. This can result in government shutdowns, as we saw in 2018 and 2019.

The debt ceiling has been raised or suspended numerous times over the years to avoid the worst-case scenario:
a default by the U.S. government on its debt.

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Ordinary and Necessary Business Expenses

All businesses can deduct ordinary and necessary business expenses from their tax return. But be careful — it’s not black and white.

ONE SIZE DOESN’T FIT ALL

Deductible business expenses aren’t uniform. An ordinary business expense for a dog walking business certainly wouldn’t be ordinary for a bakery.

Think of it like this. What expenses are unequivocally needed to run your business? A dog walker needs dog treats and leashes. But a bakery doesn’t.

BEWARE OF THE GRAY AREA

Several types of expenses tend to occupy the gray areas. These include business meals, automobile expenses, travel, and capital expenditures. Without clear-cut rules, don’t blur the lines between what’s deductible and what’s not. A lunch with a customer is a business expense. But lunch with your spouse or child likely isn’t. Travel to an industry conference is an ordinary expense. However, a trip to the Maldives, where you spend a few hours planning your company’s future, doesn’t count.

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Claiming Life Insurance Benefits

Life insurance is the ultimate safety net for your family. The first step that your personal representative (executor) should take is to file a claim for the benefits.

CHECK ALL POLICIES

With any luck, you’re already aware of the deceased’s life insurance policy and where it’s located. Ideally, it will be stored safely in a metal filing cabinet or fireproof lockbox.

And don’t forget to check for other policies. Travel accident insurance, if applicable, Social Security survivor benefits, or military benefits may be in place and available.

GET COPIES

You’ll need a certified copy of the person’s death certificate to file the insurance claim — and just about everything else you’ll need to do. Usually, there is a small fee for this. Also, request a claim form from the insurance agent or company and complete it.

CHOICES

There may be several options to receive benefits. Most likely, choices will include regular installments or a lump sum, which may be a good option if you need to pay immediate expenses. Generally, life insurance proceeds aren’t taxable.