Tax Planning

Don’t Bury Your Tax Returns, Use Them for Informed Financial Decisions

Published on: October 26, 2016 | By McCulloch & Miller, PLLC

Most Houstonians like to stash away our tax forms as soon as we file our taxes, but that’s a mistake.

When it comes to making financial decisions, you want to arm yourself with as much information as possible. One often overlooked source is your Form 1040, advises CNBC in “Use your tax return for more than paying taxes.” Sharing this document with your Houston estate planning attorney will allow them to get a clearer picture of your situation as well.

Lines 1-5 (Filing status). If you need to check a different box for your filing status, you should review your estate plan. If you get married or divorced, you'll need to update your will and the beneficiaries for life insurance and retirement plans.

How a Taxable Investment Account Can Be Good for Your Retirement

Published on: October 24, 2016 | By McCulloch & Miller, PLLC

We’ve been so inundated with the idea of tax-free investment accounts that the taxable investment account’s role in retirement planning is underutilized and overlooked.

If you’re like most Americans, you’ve got at least one and maybe a few retirement accounts. You like the tax benefits that come from having IRA's, 401k's, 403b's, 457b's and defined benefit plans. You know you’ll have to pay income taxes when you start taking distributions from them, except for the Roth accounts, but seeing those accounts grow makes you feel good. And if you have a Roth, you like knowing that even if you aren’t getting a deduction now, distributions will be tax free. But there are other kinds of investment accounts for retirement planning.

As Physician’s Money Digest says in “10 Reasons You Need a Taxable Investment Account,” taxable retirement accounts are ignored because we’re so focused on IRS-approved retirement accounts. But you might think about supplementing your savings with a taxable retirement account. This can be a regular, old-school investment portfolio that’s not linked to any government regulations and that you’re building for retirement.

Too Old for an IRA? You Can Still Be Tax-Smart

Published on: September 9, 2016 | By McCulloch & Miller, PLLC

If you are working after 70 ½, there are still ways to save money tax-free.

Wage earners are not permitted to put money into a traditional IRA in the year they turn 70 ½ according to the Kiplinger article, “Tax-Smart Ways to Save When You're Too Old for a Traditional IRA.” But you would still be able to contribute to a Roth IRA, as long as your income in 2016 is less than $132,000 if single or $194,000 if married and file taxes jointly. In addition to the money growing tax-free in the Roth IRA with no time limit, you don’t have to take any RMDs (required minimum distributions).

You can contribute up to the amount you earned for the year (your net income from self-employment), with a maximum of $6,500—that’s $5,500 for everyone under age 50, plus $1,000 for people age 50 and older. If your earnings are well over the $6,500 maximum, you can just contribute that amount. However, if your earnings are near or under the maximum, you’ll need to know what is considered compensation and how to calculate your allowed contribution.

Mid-Summer is Time for a Midyear Financial Checkup

Published on: August 19, 2016 | By McCulloch & Miller, PLLC

While the number of people making New Year’s financial resolutions are on the rise, we would do well to make a midyear financial check a regular part of the summer season.

The good news is more than 30% of Americans did give some thought to making financial resolutions this past New Year, according to a survey from Fidelity Investments. The goals were nothing out of the ordinary. They were simply the things we should all be doing with our money: saving more, spending less and getting rid of debt.

If you were one of these go-getter and goal-setters, this summer is a perfect time to look at your progress, says US News in “Keep Your Money Goals on Track with a Midyear Financial Checkup.”

How to Make Your Houston Family Business the Exception That Survives

Published on: June 13, 2016 | By McCulloch & Miller, PLLC

Whether on the evening news or a serial drama, we love to watch the inner workings of family businesses—in large part because of the drama and the high likelihood of failure.

The narrative of family dynasties is intriguing. According to the Yakima Herald in "Passing the baton: 6 challenges for family business succession," that is because successfully transitioning from one generation to the next is extraordinarily challenging and statistically unlikely. The low levels of success are matched by high expectations of business owners who believe that somehow, someway, their family will continue to control the businesses. Their viewpoint is highly optimistic and—most often—wrong.

Whether it's a national chain of supermarkets or a mom and pop corner grocery, owners will face several obstacles when seeking to ensure that their business legacy continues with and through their children. Here are some common challenges to consider.

Good Decisions Today Pay Off For Houston Planners

Published on: March 10, 2016 | By McCulloch & Miller, PLLC

Let's continue addressing a series of money decisions from Forbes' "10 Financial Choices You'll Regret in 10 Years," regarding financial choices we make in the earlier part of our lives that are surprisingly important—but we don't always see how important they are until it is too late.

Here are the next five decisions:

Trying to be a DIY investor when you haven't a clue what you're doing. Would you try an open heart surgery after watching a few YouTube videos? Of course not. So why would you consider investing by yourself without the help of a professional?

New Baby? New Tax Planning Required

Published on: March 3, 2016 | By McCulloch & Miller, PLLC

The last thing most new parents are thinking about is taxes, but the addition of a new baby to your family has some nice tax perks, according to "The Most-Overlooked Tax Breaks for New Parents" from Kiplinger's. First step: make sure your new addition has a Social Security number.

You'll need an SSN to claim your new baby as a dependent on your tax return. If you don't report the number, it can mean a $50 fine and tie up your refund. Request a Social Security number for your newborn at the hospital when you apply for a birth certificate.

Dependency Exemption. Claiming your son or daughter as a dependent will shelter $4,000 of your income from taxes in 2015, which will save you $1,000 if you are in the 25% bracket. You will receive the full year's exemption, no matter when the child was born or adopted during the year.

It’s Shredding Season in Houston!

Published on: January 8, 2016 | By McCulloch & Miller, PLLC

Keeping your financial house in order is not that complicated, according to the national newspaper USA Today in "Drowning in bank statements, etc.? Here's what you can toss." There are three overarching tasks: pay bills on time, file taxes and save more. Getting organized is the best way to start, and what better way to start the New Year than a clean sweep of paperwork?

Most of the documents you receive from banks, credit card companies and utility companies do not need to be kept, unless you anticipate having a problem.

For instance, bank accounts and bill balances can go. There's no real reason to keep those. These update you on balances at a moment in time but don't mean much in the future. Most of these don't need to be kept for more than a year or two, and typically electronic records will work just as well. However, tax-related financial documents are a different story. In the event of an audit, you'll need all the forms from that tax year to prove your return was accurate. The IRS says you should keep all your tax documents for at least three years. This includes your W-2s with your income for the tax year and your Form 1098 mortgage interest statement. If you have a claim for a loss from worthless securities or bad debt deduction, the IRS recommends you keep tax documents for up to seven years. After seven years, the only reason to hang onto tax documents is if you haven't filed a return at all or if you filed a fraudulent return, according to IRS record-keeping guidelines.

The Countdown to 2016 is On!

Published on: December 11, 2015 | By McCulloch & Miller, PLLC

New Year's resolutions are a favorite tradition. But have you taken care of your end-of-year tasks concerning your finances. There's still time to finish off your 2015 list!

US News reminds us in "6 Financial Tasks You Need to Complete Before the End of the Year" that there are several opportunities for smart financial moves and some last chances to take advantage of financial benefits. The article lists six things to consider crossing off your 2015 list in the next few weeks:

Make a Charitable Donation. Your donation to a charity is tax deductible. Why not do this and take the deduction on your 2015 tax filings? Charitable donations are nice for homeowners who itemize because they get the full benefit of the deduction.

IRS Announces New Estate Tax Rule; Implementation Guidelines Not In Place

Published on: September 22, 2015 | By McCulloch & Miller, PLLC

The IRS enacted a new law that required any estates filing Form 706 after July 31, 2015 to report the value of the estate within 30 days after filing the estate form. However, the IRS never issued any implementing regulations for the law. As a result, the IRS has recently announced that the requirements will be postponed until February 29, 2016. Mondaq.com reported this development in an article titled “IRS Postpones New Requirements For Estates To Report Asset Values.”

This does not mean that estate administrators should do anything different than they were already planning to do. It is still important to get proper valuations of estate assets as they will have to be reported for estate tax purposes.

The IRS will eventually implement regulations for the new rules and estate administrators should be ready to file at that time. On the upside, the postponement may give some administrators a little more breathing room.