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Financial Tip of the Month

March: Down to the Wire for Taxes and Looking Forward

March: Down to the Wire for Taxes and Looking Forward

March is often the considered the “crunch time” for tax preparation. This is a time when missing documents and other tax forms should be tracked down in order to give the information to your tax preparer as soon as possible for filing by the April 15th deadline.

If you plan to utilize one of the tax software programs on the market, be sure to review the requirements so that you have what you need when you are ready to file.

This is also a good time to contribute to an IRA for 2020 prior to the deadline of April 15th 2021.

Many Health Care Flexible Spending Accounts have a March deadline for filing claims from the previous year. Make sure you check your records and add up all of your eligible health care expenses for reimbursement. Due to the Covid19 Relief bill signed into law in December 2020, there may be some extensions and other changes. Contact your FSA administrator if you have questions.

Two major tax bills were passed in response to the COVID-19 pandemic, which could have an effect on your 2020 taxes.

Looking forward

Now is also a great time to look forward for 2021. It is never too late to set your financial goals.

Now may also be the time to check your credit scores. Typically you can check reports free of charge once a year, but the big credit bureaus are allowing consumers to check them free weekly, through April. You can check reports free of charge at annualcreditreport.com.

Free Application for Federal Student Aid (FAFSA)

The 2021–22 FAFSA form is here! Some states and schools have limited funds, so don’t delay! To begin your application, select the “START HERE” button on the FAFSA page. Many states have early filing deadlines.

 

February: Focusing on Taxes

February: Focusing on Taxes

During February, we celebrate Groundhog Day, Valentine’s Day, Black History Month and other events.

It is also the time to prepare for the upcoming tax season.

You have probably started getting 1099s of various types for financial statements, school tuition, contract work or other income sources, as well as W-2s if you have an employer. If you are an employer, February 1st is the deadline to send out 1099s.

Make sure you look these over and review for any potential discrepancies.

If there are no errors, put them in that folder or envelope you made last month labeled “For TAXES” along with any tax related statements you have received. If something looks odd or incorrect, now is the time to make contact with that institution to get any corrections made. This will be an ongoing process for the next few weeks, so be diligent with your organization.

First Week of February – If you haven’t already, make contact with your CPA/Tax Preparer. Many will have checklists or at minimum, will want to schedule a time to review what they need. They may also have a first come, first serve list, so now is the time to reach out. If you prepare your own taxes, this is still the best time to get things organized.

Second Week of February – If you use a software program, use this time to run any reports and review for accuracy. If you don’t use a financial software system, pull out and review those paper statements and other tax related documents. Make sure you follow up on anything unusual and check to see if there are missing documents. (Many financial institutions issue 1099s electronically. Make sure you check your email and locate these documents which can be printed out or uploaded electronically.)

End of February – Once your tax documents are in order and ready for filing, you can relax and take a breather knowing you are ready to file taxes anytime before the deadline of Thursday, April 15th 2021.

**If you’d like more time to file your taxes, you’ll need to submit Form 4868 (Application for Automatic Extension of Time to File U.S. Individual Income Tax Return) by April 15, 2021, or your particular tax deadline. With a tax extension, you can extend your filing due date by six months, up to October 15.

January 2021: Off to a Great Start

January 2021: Off to a Great Start

Let’s start the year organized!

  • January 1– First day to fund traditional IRAs, Roth IRAs and SEP IRAs (for self-employed and small business owners) for the current year
  • January 15 – 4th quarter estimated taxes are due!

Revisit your budget (spending plan) or create a new one. January is a great month to assess spending and determine if an adjustment will help you meet your financial goals.

Here are some suggestions to get organized.

1. Sort Mail as Soon as it Arrives

  • Toss junk mail.
  • Shred sensitive documents.
  • Separate out bills and keep them all in one place, such as in basket or tray.
  • File away any documents that you need to keep.

2. Create A Filing System

  • Use a filing cabinet or electronic system. Either is fine as long as you use it and it gives you quick, consistent access to information.
  • If using a filing cabinet, consider labeling 4 drawers: Tax and Legal, Medical, Household, Financial
  • If using an electronic system, create master folders, similar to the four cabinet drawers with subfolders (for example, under Financial Information, you would have subfolders for each bank, credit card and broker account).
  • Shred receipts you do not need, especially those that include a barcode.
  • Keep your pay stubs until you receive a W-2. Also keep the last paystub of the year as there could be useful information to prepare your tax return (e.g. donations made or dues paid).
  • Keep tax related documents separate, so you have them together at year-end (eg. donation receipts, medical bills, taxes paid, sale of stock. Remember most pharmacies can provide you with a yearly report of the out of pocket costs you paid for your prescriptions, so you don’t need to keep individual receipts).
  • Keep business or rental property related documents separate.

3. Create A Checklist of Bills

  • Use a calendar or list so you don’t miss a payment. Don’t forget to list the bills that are not monthly, such as quarterly insurance or property taxes.
  • Ask your utilities and credit cards to change your billing day to match your preferred payment schedule.
  • Consider putting regularly recurring bills (such as cell phone or cable) on auto payment on a credit card or use automatic bill payments with your bank account. Be sure to check that they are paid each month and the amount is as expected. Ask for discounts for auto payment. Some companies give discounts for electronic billing and automatic payments.
December: Planning ahead

December: Planning ahead

The holiday season is in full swing, and we have news that there will soon be an effective vaccine for Covid19. With so much going on in our lives, it is easy to overlook several of the important financial dates for this month, so here’s a reminder.

  • December 31– Last day to take required minimum distributions for your IRA, 401(k) and inherited IRAs. One exception: if it’s your first RMD, which must be taken by April 1 following the calendar year during which you turn 70 ½.
  • December 31: Deadline to set up most types of retirement accounts so that eligible contributions count toward the current year.

Create a Budget and Track Expenses

December is a good month to review expenses for the year, which can help with planning your budget for 2021. Since 2020 was an unusual year due to the Covid19 pandemic, it will be important to factor its impact on your finances for next year.

For instance, do you plan to budget for a vacation in 2021 or will you wait for a later time? Maybe you found yourself tapping your emergency or savings accounts during this year.  If so, it will be important to replace those funds when you are able to do so.

Creating a budget is important in order to maintain overall control of income and expenses. From spreadsheets, paper and pen to mobile apps, there are many ways track spending. Finding the method that works best for you is important to ensure your success and provide you with the peace of mind that comes when your finances are in order. 

Happy Holidays

November: Giving Thanks and Year End Planning

November: Giving Thanks and Year End Planning

Everything has changed in 2020 but much remains the same. We still give thanks for family and the friendships we have. And as the year comes towards an end, there are time-sensitive financial decisions and tasks to consider. 

Medicare Enrollment Deadlines

The Fall Medicare Open Enrollment lets you make changes to your Medicare coverage. This includes enrolling in Medicare Advantage, switching Medicare Advantage plans, returning to Original Medicare from Medicare Advantage. The main Medicare Open Enrollment Period for both Medicare Advantage and Medicare Part D prescription drug coverage happens annually from October 15 to December 7. 

Source: https://www.ehealthinsurance.com/medicare/enrollment-all/medicare-open-enrollment

Year End Retirement Planning

Contribute to 401k plans by December 31

Deposits to your 401k plan are due by the end of the year. Typically, 401k contributions are made through payroll deduction. It may take your company a pay period or two to process a change and make the deposit.

Take coronavirus expense withdraws by the end of the year.

Retirement savers can withdraw up to $100,000 from a 401(k) or IRA to pay for coronavirus expenses until Dec. 31, 2020, without having to pay the usual 10% early withdrawal penalty. 

Donate your IRA distribution to charity

IRA owners who are age 70 1/2 or older can avoid paying income tax on part or all of their required distribution if they directly transfer an IRA withdrawal to a qualifying charity. 

Qualify for the Savers Credit

Low- and moderate-income workers who save for retirement in a 401(k) plan or individual retirement account could qualify for the saver’s credit. This retirement savings contributions credit can be claimed when filing taxes.

More time for IRA contributions

You have until April 15, 2021, to make an IRA contribution that will qualify you for a tax deduction on your 2020 return. You can contribute to an IRA shortly before filing your taxes to get a nearly immediate reduction in your tax bill.

October: School, Health Care, and Thinking Ahead

October: School, Health Care, and Thinking Ahead

If you have a family member who will be in college for the 2021-22 school year, October 1 st is the start date for submitting the Free Application for Federal Student Aid, or FAFSA. The FAFSA is the key to getting financial aid; every student should file because not all financial aid is based on need.

October is a good time to check and, if needed, adjust your 2020 tax withholding. If you’re not withholding enough, you could face an unexpected tax bill or even an underpayment penalty when you file your return. If you’re withholding too much tax, you may be able to take home a larger paycheck instead of waiting for a refund next year. The IRS has an online Tax Withholding Estimator calculator available on the IRS website.

People enrolled in a Medicare Prescription Drug Plan can benefit from comparing plans during open enrollment which begins October 15th and runs through December 7th. Plans often change premiums, formularies, drug costs, deductibles, and other plan features annually. The plan that was most cost effective for an enrollee in 2020 may not be the best plan for them in 2021.

An important message from the Consumer Financial Protection Bureau (CFPB)

“As a result of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, consumers started to see some financial relief through EIP issued by the Internal Revenue Service (IRS). However, millions of individuals who do not normally file income taxes are entitled to EIP. These individuals have until October 15, 2020 to enter their information in the IRS Non-Filers Tool to receive their payment”. 

Finally, as the cooler season approaches and the weather changes, putting together an emergency kit is one way to prepare for storm related outages.

 

 

 

September: 2020 Is Not What Any of Us Expected It to Be

September: 2020 Is Not What Any of Us Expected It to Be

Since COVID started, we have all had to make changes to our daily routines. Tasks that we used to do without a second thought now take extra planning and preparation … When is the best time to go to the grocery store? Do I have my mask? Do I have my hand sanitizer? Do I have to touch that keypad? We have all had to figure out what works best for us while still doing everything we can to keep our families and communities safe. 

And while all of this has been a huge inconvenience and has had so many negative impacts on our mental health, it has also allowed me to find gratitude in the small things. Gratitude for my continued health and the health of my loved ones. And the blessings that have allowed me to pivot working from home while still bringing in an income for my family. And, of course, gratitude for my newly discovered expertise in all things Zoom and video calls!

I have been hearing from a lot of my friends and clients. I am hearing more questions than ever about advanced care planning and financial documents (what needs to be updated, how often, how to do it). 

People want to know if they need a DNR and how to make one. Questions about estate planning. What do my clients need to do, what do their parents need to do? This is such a time of uncertainty, and we are all dealing with changes on an almost daily basis.

I do know that the only way we are going to get through this is together. So if you have some of those same questions (that I just referenced), please reach out. Know that I am here to help.

 

August: Living in the Moment and Looking Ahead

August: Living in the Moment and Looking Ahead

One television commercial that has been around awhile has an actor ask the question “What’s in your wallet?” referring to a specific credit card.

For this month’s Financial Tip, the question is “What’s in your credit report?”

August is usually a time when people enjoy well-deserved vacations and time away from school and work. Many look forward to this month as a time to relax and recharge before heading back to their usual schedules in September.  

However, the Covid19 pandemic has had a devastating impact on our country and our world. For many, the return to work and school will look very different this year. It will be crucial to take the necessary precautions such as wearing masks, safe distancing when possible, frequent hand washing, and following CDC guidelines to protect ourselves and our loved ones.

Your credit health is important as well.

Knowing where you stand with regard to your finances and credit is one important safety measure that you can take during this time.

In order to help you monitor your information during Covid-19, the credit reporting agencies (Equifax, TransUnion and Experian) are offering all Americans free credit reports through an online service. Learn more at https://www.consumer.ftc.gov/articles/0155-free-credit-reports. Additionally, the three national credit reporting agencies are giving people weekly access to monitor their credit report — for free

You can obtain free credit freezes at all 3 reporting agencies. Credit freezes prevent new accounts from being opened without your permission. You may also want to add a fraud alert (for free) to your credit account to ensure lenders verify your identity and help prevent identity theft. Knowing that you have taken the necessary precautions to protect your credit can go a long way to having peace of mine with your finances during challenging times.

Once you’ve checked your credit and made sure that everything is in order, sit back and relax! You’ve still got a month of summer left to enjoy and you can do so knowing that you have taken the necessary precautions to protect your credit health.

July: Financial Independence is the Goal!

July: Financial Independence is the Goal!

We are officially midway through the year! This is a great time to pause and review your financial state.

We are in very challenging times with the Covid19 crisis.  With the increasing prevalence of scams and fraud, it’s more important than ever for people to be vigilant with their finances. Here are some tips from the AADMM Money Matters blog to help you keep your money safe. https://secure.aadmm.com/2020/05/28/be-aware-of-scams/

Federal tax filing deadline

The 2019 federal tax filing deadline is extended until July 15 (from April 15). Be sure your federal taxes are filed on-time. Some states have also extended the filing deadline. If you need to file state taxes, be sure to check with your own state to verify the deadline.

Do your financial goals make you happy?

Think about what makes you happy: Is it the family vacation? The idea of owning your dream home? Retiring early?

If you aren’t actively planning for any of these things, why not? Maybe it’s time to re-prioritize your goals. The KonMari method stresses focusing your energy on the things that will serve the person you are now and who you hope to become. When applied to your financial goals, you could think of it as finding a balance between spending on what serves you today, but also saving and planning for bigger things in the future. Thanks to Northwestern Mutual for this great tip. 

Should you consolidate your debt?

If you have lots of debt, consider consolidation. When you consolidate you combine multiple loans into a single debt with one monthly payment. As a result, you may take high-interest debt, like credit cards or student loans, and bundle them into a loan that typically carries a lower interest rate. So, not only does debt consolidation simplify your monthly budget it could save you thousands of dollars in interest charges. Do you need assistance with this? Find a daily money manager near you to help.

 

June: Taxes, Graduations, and Summer Expenses… Oh my!

June: Taxes, Graduations, and Summer Expenses… Oh my!

What a tumultuous world we’re living in. So much is happening and the Covid19 pandemic continues without a real end in sight. But one thing we can count on is taxes. 

June 15th is usually the deadline to pay 2nd quarter estimated taxes. However, this year the IRS deadline has been extended to July 15th.  Be sure to submit your federal estimates via mail or online no later than July 15th. Some states have not extended their deadline for the 2nd quarterly estimated taxes so check with your state for that information.

School’s out…..now what?

Summer vacations can call for additional expenditures for summer camp, day care, summer school, family travel, etc. Have you added these costs into your spending plans for the next few months?

June 30th is the midpoint for 2020.  

This time is a great opportunity to review your yearly spending plan and make adjustments as needed. This will ensure that you have the necessary funds for vacations and other summertime activities.

May: It’s Almost Mid-Year. Let’s Regroup and Focus on Some Details!

May is a great time to think about updating important information. Have you recently reviewed who you have designated as a beneficiary on your life insurance policies and retirement accounts? Not having the person or persons designated whom you currently wish to benefit can prove to be an unfortunate mistake. See the CNBC Investor’s Toolkit on the importance of updating beneficiaries. 

Other information to update in your personal records (for yourself to have handy and your loved ones) is your insurance information. Buy a new car, add drivers in the family, move homes, get a new Medicare card, sell valuables listed on a personal articles policy? These are all changes that require updating your insurance information. 

April: It’s Tax Time!

April is traditionally tax time. But, due to COVID-19, tax filing deadlines have been extended or many. 

The government is offering temporary relief.

  • Federal taxes are not due until July 15. The Treasury Department and Internal Revenue Service announced today that the federal income tax filing due date is automatically extended from April 15, 2020, to July 15, 2020. Taxpayers can also defer federal income tax payments due on April 15, 2020, to July 15, 2020, without penalties and interest, regardless of the amount owed. IRS.gov website
  • Many states have also extended their tax filing deadlines, as reported by USA Today.

 

Annual Financial Calendar
Daily money managers are adept at keeping track of clients’ financial obligations using a variety of methods. One such method frequently used to stay organized and make payments on time is a financial calendar. A financial calendar is a simple system for keeping track of financial obligations throughout the year or for a chosen period of time, in much the same way as people remember birthdays, anniversaries, and appointments.

For those who utilize technology, here are some options available:

  • Reminders automatically generated using financial software like Quicken or Microsoft Money.
  • Spreadsheets that can be sorted by payee, payment due date, or other criteria.
  • Reminders created using apps for electronic devices.
  • Reminders established with payees. For example, some insurance companies will send emails to policyholders a few weeks before premiums are due.

A Financial calendar does not have to be high-tech to be effective. It can be as simple as a ‘list’ of financial obligations that you review regularly, or a paper calendar with payments due and funds to be received recorded in different ink colors to make them easier to spot.

Financial calendars are also useful for documenting other financial information such as IRA required minimum distribution (RMD) deadline dates. For those living on a fixed income, tracking receipt of dividends and other distributions is useful for creating accurate cash flow projections.

It is important that the system you use is one that you can maintain.

You can create a perfect financial calendar, but you will only be successful if you use it. For those who struggle with keeping track of bills, or lack the time to handle personal financial affairs, you may want to consider hiring a daily money manager to manage your financial calendar. This will ensure that all of your bills are paid on time every month.

AADMM’s Public Awareness Committee has created a Financial Calendar Series. Each month, financial events and reminders will be added. Watch for updates on AADMM’s Facebook page.