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After a sharp waterfall drop in March, major equity markets advanced strong in the second quarter. Following the Dow Jones Industrial Average’s (DJIA) worst first quarter ever the index posted its best second quarter performance since 1938 rising over 17%. The S&P 500 ended the quarter up 20%, achieving its largest quarterly gain since 1998 and the best second quarter for blue-chip equities since the S&P 500 was created in 1957. While those indexes did not reach their earlier year highs, the Nasdaq Composite recorded all-time highs this quarter as technology stocks have largely emerged strong following their March fall. (Sources: Yahoo Finance 6/30/20, Barron’s 6/30/2020)

Although the equity markets posted gains this quarter, efforts to contain the coronavirus have had a major impact on the global economy. Most of the second quarter’s stock-market advances took place in April and May. During June, the major indexes stayed in a relatively narrow range as investors evaluated increasing coronavirus cases against positive economic data.

As equity indexes soared from their late-March lows, there was an incredible amount of data to digest including:

• bond yields remaining very low;
• gold prices rising to an eight-year high;
• unemployment skyrocketing to ultra-high levels;
• oil prices rebounding from Q1 lows (still down YTD);
• a Chinese survey showing factory activity rose to a three-month high in June; and,
• disease experts warning about losing control of the COVID-19 outbreak.

(Source: Market Watch 6/30/20)

It has been the best of times and the worst of times for U.S. equity benchmarks over the past two quarters. This could be why headlines are sharing that stock-market strategists have never been more confused in June about the year-end outlook for equities.

Investors this quarter enjoyed a nice rise in equity prices. However, with markets being heavily volatile, some analysts feel that the market may have moved too far, too fast and based on historical numbers, like price earnings, that equities are highly overvalued and overpriced. The other camp insists that we are still in a “TINA” market, meaning, There Is No Alternative to stocks. This group feels that with interest rates still near historic lows, that equities need to be an investor’s main position. Equities are not cheap and even the savviest of investors need to be considerate of risk.

We could devote many pages to all of the issues that need to be watched, but for the sake of brevity this quarterly update will focus on a few of the central themes for investors. As financial professionals, we assist clients by providing ideas and suggestions based on their risk tolerances and objectives. Our goal is to focus on each client’s timeframes and goals.

Interest Rates Are Still in the Spotlight

Changes in interest rates are important for investors to note because they can have both positive and negative effects on the markets. Central banks historically have raised rates when the economy is overly strong and lowered rates when the economy is sluggish. The Federal Reserve (Fed) determines the United States rates at which banks borrow money. At their June meeting, the Fed kept interest rates near zero and indicated that’s where they’ll stay as the economy recovers from the coronavirus pandemic.

“We’re not thinking about raising rates,” Fed Chairman Jerome Powell said. “What we’re thinking about is providing support for the economy. We think this is going to take some time.” Central bankers also projected at the June session that the economy will shrink 6.5% in 2020. Then in 2021 they forecast a 5% gain, followed by 3.5% in 2022, both well above the economy’s longer-term trend.

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At the June session, the central bank repeated its commitment from the April meeting that it, “expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.” Chairman Powell also said the Fed’s economic projections are based on “general expectation of an economic recovery beginning in the second half of this year and lasting over the next couple of years, supported by interest rates that remain at their current level near zero.” (Source: CNBC 6/10/2020)

Low interest rates can make the yields on bonds less attractive to investors that need and seek returns. With the Fed committed to keeping interest rates low for the foreseeable future, investors need to reexamine their portfolios and return expectations. Interest rates will continue to be towards the top of our “watch” list.

Unemployment

After several quarters of strong employment numbers, COVID-19 decimated the U.S. work scene. The COVID-19 outbreak and the economic downturn it caused increased the ranks of unemployed Americans by more than 14 million, from a historically low number of 6.2 million in February (a 3.8% rate) to 20.5 million in May 2020 (a 13% rate). The May numbers were the second highest since the 1940s, trailing only the level reached in April of this year (14.4%). The rise in the number of unemployed workers due to COVID-19 is substantially greater than the increase experienced from the Great Recession. (Source: Pew Research)

Although the government, through programs like the Payment Protection Plan (PPP) have tried to save jobs, with many businesses closed or operating with restrictions, unemployment will continue to be an area that should be monitored by investors.

Economic and Political Concerns

Equity markets typically lead the economy and one big unanswered question moving forward continues to be, how will the economy recover? The answer depends on who you ask. “The economy’s turnaround from coronavirus-addled lows will arrive in the form of a steep V-shaped rebound”, according to Blackstone CEO Stephen Schwarzman. He feels that we will see a two-stage recovery, with economic reopening sparking a rapid rebound from the bottom set in the second quarter. He also shares that, “Where the Federal Reserve’s liquidity-boosting measures drove a sharp run-up for risk assets, easing of nationwide lockdowns will prompt a similar pattern for economic activity.” His advice to investors is, “You’ll see a big V in terms of the economy going up for the next few months because it’s been closed. As people are allowed to go back, the economy will really respond a lot.” (Source: BusinessInsider.com 6/10/20)

JPMorgan strategists in their June message were less optimistic. They feel, “Investors should be more selective over the next six months as some assets will outperform others.” Their advice is that, “Investors should be more discerning over the next six months as markets are showing a ‘slight fatigue’.” (Source: BusinessInsider.com 6/10/20)

American Funds/Capital Group’s Vice Chairman and portfolio manager Rob Lovelace shares, “it’s hard to predict the exact path of the recovery.” In their June mid-year outlook, he said, “It’s hard to know how wide the valley is, but I believe we will end up in a better place two years from now.” (Source: Capital Group 2020 Market Outlook 6/2020)

When sharing his economic outlook for the remainder of 2020, David Solomon, the CEO of Goldman Sachs said that, “uncertainty still remains 6-12 months out, and what additional negative impacts will result on the economy, including on the healthcare situation”. He expects the recovery to get more challenging and flatten out toward the end of the year and as we get into 2021. He noted it will take “quite a while” to get the economy back to where it started before the crisis. (Source: SeekingAlpha.com 6/20/20)

As if the economy did not create enough concerns, political uncertainty (including the upcoming 2020 elections), continuing health concerns and social unrest are all additional areas we need to be aware of. From a financial standpoint, we try to understand how the political landscape affects investment markets. We will be keeping an eye on these activities and how it may affect your investments.

Strategies for Investors During Market Volatility

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Bear markets like the one we experienced this March can be confusing and painful. When investors suffer a sharp decline, it could feel like it’s never going to end. Any investor that panicked and sold their investments could have missed out on this quarter’s rebound. While prior equity market performance is no assurance of present performance, something to remember is that post-World War II, bull markets have been far more robust than bear markets, and they’ve lasted considerably longer. While every market decline is unique, over the past 70 years the average bear market has lasted 14 months and resulted in an average loss of 33%. By contrast, the average bull market has run for 72 months — or more than five times longer — and the average gain has been 279%. (Source: Capital Group 6/2020)

As investors learned in the last severe downturn, equity market returns have often been strongest right after the market bottoms. After the carnage of 2008, U.S. stocks finished 2009 with a 23% gain. Missing a bounce back can put an investor behind, which is why it’s important to consider staying invested through even the most difficult periods. Now is a good time to:

Revisit your financial goals and objectives.

Investors should always put their primary focus on their personal goals and objectives. When equity markets become volatile sometimes even the savviest of investors become not just concerned, but unnerved. It’s important to keep perspective when markets are volatile. It is very important that you understand your situation and your financial plan. Letting your emotions drive your decisions can be costly. A wise strategy is to proceed with caution and always allocate your investments to match your risk tolerance.

We focus on YOUR goals and strategy.

Investor Outlook

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The market responded well in the short-term to what looked like a successful reopening of the economy. Many analysts were amazed by the quick bounce-back in the market despite the enormous unemployment rate and the continuing bear market in the economy. While the fears of another downturn are real, investors need to understand that there is a major difference between a sharp selloff of 5%-10% and an over 30% decline like we suffered in March. Analysts feel that the public health situation and the economic landscape have significantly improved since then, so pullbacks in equity markets might even bring for some investors buying opportunities and not reasons to sell. Moving forward, an investor has to keep in mind that the fate of COVID-19 is still a gigantic unknown. It is impossible to predict if the first wave of impact is now calmed or if a second wave will emerge. Economic data will continue to be hard to forecast and equity markets are not always tied to economic data. During confusing and volatile times, it is always wise to have realistic time horizons and return expectations for your own personal situation and to adjust your investments accordingly.

Three questions to ask are still:

Are you confident in your strategy?

Are you comfortable with your strategy?

Are you consistent with your strategy?

If you have carefully created a strategy with realistic financial goals, then try to not allow emotions or media magnification to influence you to shift from it. Remember the words of legendary investor Benjamin Graham, Warren Buffett’s mentor:

“A financial strategy is only as good as your ability to consistently follow it.”

We are here for you!

Our goal is to understand our clients’ needs and then try to create a plan to address those needs.

1. Has your current financial advisor reviewed the tax consequences of your investments?
2. Has your current financial advisor discussed tax planning and your investments?
3. Would you like a COMPLIMENTARY opinion of your situation?

If you answered NO to questions 1 or 2 and/or YES to question 3, call us at 410-908-9293 to schedule a complimentary financial check-up.

What you don’t know could hurt!

“The best way to measure your investing success is not by whether you’re beating the market, but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go.”

Note: The views stated in this letter are not necessarily the opinion of Independent Financial Group, LLC (IFG), and should not be construed, directly or indirectly, as an offer to buy or sell any securities mentioned herein. Investors should be aware that there are risks inherent in all investments, such as fluctuations in investment principal. With any investment vehicle, past performance is not a guarantee of future results. Material discussed herewith is meant for general illustration and/or informational purposes only, please note that individual situations can vary. Therefore, the information should be relied upon when coordinated with individual professional advice. This material contains forward looking statements and projections. There are no guarantees that these results will be achieved. All indices referenced are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. The S&P 500 is an unmanaged index of 500 widely held stocks that is general considered representative of the U.S. Stock market. Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal. Past performance is no guarantee of future results. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Sources: CNBC.com, marketwatch.com, Yahoo Finance, Barron’s, Pew Research, Seeking Alpha, BusinessInsider.com, Capital Group. Contents provided by the Academy of Preferred Financial Advisors, 2020©

The post Economic Update: Second Quarter 2020 appeared first on Financial 1 Tax.

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No one expected the longest bull market in history to see its demise brought on by a virus. While U.S. equity markets were able to withstand a trade war with China, a presidential impeachment, the potential for a global recession and global uncertainty including Brexit and civil wars in the Middle East, the U.S. economy was ambushed by a silent and highly contagious virus.

The first three months of 2020 were filled with Covid-19 fears and economic responses. The world is experiencing a pandemic and a financial crisis that caused many investors to feel a level of anxiety that they have not had for over a decade. It’s almost impossible to remember that in Mid-February, equity markets were experiencing all-time, record highs. Now, we are in an unprecedented, event-driven bear market.

In the first quarter of 2020, more specifically, on March 12, the longest bull market in the history of the S&P 500 ended. This was the worst quarter for the Dow Jones Industrial Average (DJIA) since 1987 and its poorest first three-month start to the year ever.

The Dow Jones Industrial Average’s decline of 23.2% for the quarter was its biggest since the 25.3% drop seen during the fourth quarter of 1987. The S&P 500 posted a 20% decline. Prior to this waterfall downturn, the stock market seemed unstoppable, with both the 122-year-old DJIA and the S&P 500 quadrupling earlier this year from their March 2009 lows. Many investors who remained vigilant and held their positions during that time were generously rewarded. In just a few weeks, the stock market experienced several firsts in its history including:

• In less than three weeks, the S&P 500 fell from a 52-week high to a 52-week low.
• The Bloomberg Barclays U.S. Corporate Bond Index lost more than 7% in a week.
• The New York Stock Exchange (NYSE) experienced its worst set of down days where 90% or more of NYSE-traded stocks closed lower for the day.
• The S&P 500 hit the circuit breaker and triggered a trading halt four times.
• The Nasdaq Composite Index suffered its largest one-day percentage decline ever.
• The Dow Jones Industrial Average posted its biggest weekly gain since 1938.

(Sources: marketwatch.com 3/16/20, WSJ 3/27/2020)

An 11-year bull market has changed into one of the quickest bear markets of all-times. Not only is the world trying to stop the spread of a highly contagious virus, but it is also scrambling to fix the disruption of global supply chains and the decline of consumer demand.

Interest Rates Are Still in the Spotlight

After lowering the federal funds rate by a half-point to a range of 1.0% to 1.25% in between its regularly scheduled meetings, as a response to the risks the COVID-19 coronavirus outbreak was creating, the Federal Reserve cut its benchmark interest rate in mid-March by a full 1% to 0%-0.25%. When the Fed first started reducing interest rates, many experts noted that the central bank was “catching up” to where markets had headed. Now, it seems as if they are responding to both the economy and the fact that the 10-year Treasury had fallen to all-time lows.

The all-time low for the Fed Funds Rate is effectively zero. The Fed has only lowered their rate to a range of 0% to 0.25% twice: once during the financial crisis of 2008 and now in March of 2020. (Source: The Balance, 3/30/20)

CNBC reported on April 1st that the, “10-year Treasury yield falls to 0.6% as the coronavirus crisis deepens.” With interest rates at or near all-time lows, many investors cannot generate income or meet their long-term goals with a full portfolio of cash and bonds. (Source: CNBC, 4/1/20)

Oil Prices

Oil prices suffered an extremely rough stretch this quarter. As if things were not bad enough, the oil price war between Saudi Arabia and Russia, which emerged suddenly and dramatically on March 7, compounded the already ultra-bearish demand backdrop. The Saudi Arabia and Russia oil price war resulted in a massive price drop on March 8, 2020, when U.S. oil prices fell by 34% and crude oil fell by 26%. (Source: CNN.com; 3/8/2020)

The Coronavirus’ impact on oil consumption is unlike anything in modern history. Governments continue to impose flight restrictions and other travel bans, enforce lockdowns, and require non-essential businesses to close doors. Numerous school closures also mean many fewer buses and cars will be on the roads. As the quarter closed, there was pressure on the president to step in and assist in resolving the price war. Oil prices saw the worst month and quarter in oil price history down over 50%. With energy companies and oil still being a contributing factor to the overall economy, oil prices are a topic we are keeping a watchful eye on. (Source: Washington Post, 4/2/20)

The CARES Act

The government is trying to help businesses and prevent the threat of a recession through the $2.2 trillion-dollar Coronavirus Aid, Relief, and Economic Security (CARES) Act. This emergency relief package, the largest economic-relief package in U.S. history, included: Extensions of unemployment benefits, $150B for state and local governments, $500B in general corporate aid, $350B in small-business loans that will be facilitated by community banks, $100B for the healthcare system and Direct payments to individuals: Individuals can receive up to a maximum of $1,200 per person ($2,400 per couple) depending upon their income.

The estimates for the total monetary and fiscal output to manage this crisis is $4 trillion, according to Jurrien Timmer, Director of Global Macro for Fidelity Management and Research Company. So far there is a strong response from the U.S. Government, which will need time to see if it produces results. (Source: fidelity.com, 3/23/20)

A Brief Lesson in Some Market Terms

Oftentimes, we hear the wrong words used in the wrong context. For educational purposes, we feel it is important to clarify some stock market words and their definitions.

“Dip” – a short-lived downturn from a sustained longer-term uptrend.

“Correction” – a 10% drop in the market from recent highs. Historically corrections occur an average of about every eight to 12 months and last about 54 days. (Source:thebalance.com 3/9/20)

“Bear Market” – a long, sustained decline in the stock market. If the market declines 20% from the its recent high, this is considered the start of a bear market.

“Crash” – a sudden and dramatic drop in stock prices, often on a single day or week. Crashes are rare, but typically happen after a long-term uptrend in the market.

Bear Market Basics

Bear Market’s Most Basic Principle: Bear markets are a part of the investing experience. Many people believe that a bull market means a steady growth in equities. This is not the case. During this most recent, long-standing bull market, there were 13 corrections and the market moved down intraday into bear market territory (down at least 20%) three times. (Source: www.fidelity.com)

We have now entered into a bear market territory (a close of 20% down) so it might be helpful to review some information about bear markets.

Bear markets can be classified into one of three categories: structural; cyclical; and event-driven.
Goldman Sachs analyzed bear markets back to 1835. They defined these three markets as follows:

1. Structural: bear markets created by imbalances and financial bubbles, very often followed by a price shock such as deflation. The markets have an average drop of 57%.
2. Cyclical: bear markets that are typically a function of the economic cycle, marked by rising interest rates, impending recessions and falls in profits. These markets have an average drop of 31%.
3. Event-driven: bear markets created by events such as war, an oil price shock, an emerging-market crisis, or like most recently, a sudden viral pandemic (Covid-19).
   We are currently in an “event-driven” bear market. These are the bear markets that are hardest if not impossible to forecast or navigate. Covid-19 created a first of its kind bear market, one that was caused by a virus. We have had event-driven bear markets, but none were created by a viral pandemic. According to Goldman Sachs Chief Global Equity Strategist Peter Oppenheimer, “event-driven ” bear markets, on average, result in lower declines than the other two types, and historically have lasted shorter. This unusual downturn is one that offers no easy outcomes. (Source: marketwatch.com 3/11/20)

How should investors think about this downturn and what should they do?

Investors generally hope that equity markets will go up. The volatility and turbulence of this current economic and political environment has caused even some of the most seasoned investors to become skittish. In March, legendary investor Warren Buffett said that he hadn’t seen anything like the coronavirus pandemic. “If you stick around long enough, you’ll see everything in markets,” he told Yahoo Finance. “And it may have taken me to 89 years of age to throw this one into the experience.”

Since that statement, it’s become even more confusing as infections mount around the world and the stock market continues to spin out of control in both directions. Many investors are trying to compare their portfolio’s performance during this difficult period. So how did the Berkshire Hathaway leader perform?

“While Buffett is well known for weathering the worst market downturns and coming out stronger, the last several weeks have been just as painful on his portfolio as it has on the broader market,” Bespoke explained in a post noting that the average stocks in his top holdings on March 24th were down 37% from their February highs. Perhaps the most important thing to think about is that like everybody else, his portfolio obviously hasn’t been immune to all this volatility. (Source: MarketWatch.com, 3/27/20)

The chart in this report shares that the six biggest point declines and the six biggest point increases in the Dow Jones Industrial Average (DJIA) all came in the last five weeks of this quarter. On March 12th, the DJIA fell 2,352 points which was over 9%. Had you sold that day you missed the next day’s (March 13th) rise of 1,985, also a move of over 9%. This level of volatility is unprecedented and therefore even the savviest of investors needs to PROCEED WITH CAUTION!

Helpful Strategies for Investors

Revisit Your Personal Objectives — First and foremost, we continue to urge you to ask yourself four questions:

1. Have my financial timelines changed?
2. Have my financial goals changed?
3. Has my risk tolerance changed?
4. Are there any changes my advisor needs to know about my situation?

Think Long-Term — Investing involves uncertainty and therefore investors should consider using long time horizons.

Look into Rebalancing — Maintaining a properly designed and well-diversified portfolio is important. Now is a good time to take a look at your portfolio and consider any rebalancing that may need to be performed.

Suspend Distributions — If you are comfortable with suspending distributions and looking for a potentially better time to take them, please call us at we can see if this strategy works for your personal situation.

Consider Roth IRA Conversions — There are many reasons to consider Roth IRA conversions. For many retirement accounts with equities, account values are down. This can create opportunities, especially for those investors currently in the 12%, 22% and 24% tax brackets. Add in the new SECURE Act’s changes to inherited IRAs and it becomes even more prudent to consider the pros and cons of a Roth IRA conversion. Roth Conversions have some complicated rules and guidelines, therefore, as always, first discuss this option with us and your tax preparer to see if they are a good fit for your financial goals.

Think Rationally, Not Emotionally — One of Sir John Templeton’s “Rule’s for Investment Success” is, “Do not be fearful or negative too often.” Market turbulence should remind us that it is a good idea to re-evaluate instead of panic.

Tune Out Media Magnification and Seek the Help of a Professional — One of our primary goals is to make sure you are comfortable with your investments. We will always consider your feelings about risk and the markets and review your unique financial situation when making recommendations.

We pride ourselves in offering:

• consistent and strong communication,
• a schedule of regular client meetings, and
• continuing education for every member of our team on the issues that affect our clients.

A skilled financial professional can help make your journey easier. We care about our clients and we are here for you. Our goal is to be prepared, not scared! If you feel we need to talk, please call. We are honored that you have chosen us to help with your financial needs.

Registered Representative offering securities and advisory services through Independent Financial Group, LLC (IFG), a registered broker dealer and a registered investment adviser. Member FINRA/SIPC. Financial 1 Wealth Management Group and IFG are unaffiliated entities. Note: The views stated in this letter are not necessarily the opinion of Independent Financial Group, and should not be construed, directly or indirectly, as an offer to buy or sell any securities mentioned herein. Investors should be aware that there are risks inherent in all investments, such as fluctuations in investment principal. With any investment vehicle, past performance is not a guarantee of future results. Material discussed herewith is meant for general illustration and/or informational purposes only, please note that individual situations can vary. Therefore, the information should be relied upon when coordinated with individual professional advice. This material contains forward looking statements and projections. There are no guarantees that these results will be achieved.

All indices referenced are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. Stock market. Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal.

Diversification is used to help manage investment risk; it does not guarantee a profit or protect against investment loss. Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss.

Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. International investing involves special risks, including currency fluctuations, differing financial accounting standards, and possible political and economic volatility. Investing in emerging markets can be riskier than investing in well-established foreign markets. Investing involves risk and investors may incur a profit or a loss. Sources: Barron’s, marketwatch.com; washingtonpost.com; goldmansachs.com; politio.com; fidelity.com; cnn.com; forbes.com. Contents provided by the Academy of Preferred Financial Advisors, Inc.

The post Economic Update: First Quarter 2020 appeared first on Financial 1 Tax.

Tatyana Bunich CEP.RFC. | Contact us: 410-908-9293

Income tax is a large revenue source for the United States government. While tax rates have changed many times, since the 1860’s, the United States has used a “progressive” tax code. A progressive tax code means that people who make more money are taxed at a higher rate than those who make less money. Our progressive tax system works by placing earners through different brackets according to how much money they make. The dollar amounts define your tax brackets and there are differing tables depending on your filing status (single, married, etc.). This matters in determining your marginal tax rate.

Filing 2019 Income Taxes

Understanding Marginal Tax Rates

Determining your tax bracket is not as simple as just adding up your total income and checking a tax table. Taxpayers need to calculate their taxable income (which can be sometimes referred to as their “adjusted gross income”) and then adjust their income for any deductions, adjustments and exemptions they are allowed to find their final taxable amount.

Once you determine your final taxable income amount, it’s critical to know that not all of your income was taxed at the same rate. So, for example if you are married filing jointly, your first $19,400 is taxed at 10%. If these same tax filers have a final taxable income of $95,000, then these taxpayers are in a “marginal tax bracket” of 22%. The key thing to note is that in this example, the last dollar earned is taxed at that 22% tax rate.

2019 Tax Law Updates

For 2019, Form 1040 has been slightly redesigned. There is time to look into tax planning ideas for your 2020 taxes, but here are some things that 2019 tax filers should review. They include:

• Tax brackets have been slightly adjusted.
• The standard deductions have risen from 2018.
• There are still caps to state and local tax (SALT) deductions.
• There are new deduction rates for medical expenses.
• Capital gains will still impact your income.
• There is still a 3.8% Medicare Investment Tax.
• Charitable donations are still deductible.
• You might still be able to contribute to retirement plans (or take an RMD) if appropriate.

2019 Tax Tables and Tax Rates

There are still seven federal income tax brackets for 2019. The lowest of the seven tax rates is 10% and the top tax rate is still 37%. The income that falls into each is scheduled to be adjusted in 2020 for inflation. For 2019, use the chart in this report to see what bracket your final income falls into.

TAX TIP: If you are not sure how best to file, ask your tax preparer or review IRS Publication 17, Your Federal Income Tax, which is a complete tax resource. It contains helpful information such as whether you need to file a tax return and how to choose your filing status.

2019 Standard Deduction Amounts

Most taxpayers claim the standard deduction. For 2019, the standard deduction has slightly increased. The amounts are now $12,200 for single filers and $24,400 for those filing jointly ($18,350 for head of household filers). If you are filing as a married couple, an additional $1,300 is added to the standard deduction for each person age 65 and older. If you are single and age 65 or older, an additional deduction of $1,650 can be made.

Increased Child Tax Credit

For 2019, the maximum child tax credit is $2,000 per qualifying child. Up to $1,400 of the Child Tax Credit is refundable; that is, it can reduce your tax bill to zero and you might be able to get a refund on anything left over.

There is also a non-refundable credit of $500 for dependents other than children. The modified adjusted gross income threshold at which the credit begins to phase out is $200,000 and $400,000 if married filing jointly.

State and Local Tax (SALT) Deduction

2019 also continues the changes to state and local tax deductions that cap a taxpayer’s state and local tax (SALT) deduction at $10,000. This includes both state income and property taxes. This change affected a large number of taxpayers who live in states with high property taxes and those who pay larger state income tax bills.

Medical Expense Deduction

In late December 2019, legislation retroactively made the 7.5% threshold available to taxpayers in 2019 and 2020. The 10% threshold amount was postponed until 2021.

Investment Income

Long-term capital gains are taxed at more favorable rates compared to ordinary income. For qualified dividends, investors will continue to be taxed at 0, 15 or 20%.

One tax strategy is to review your investments that have unrealized long-term capital gains and sell enough of the appreciated investments in order to generate enough long-term capital gains to push you to the top of your federal income tax bracket. This strategy could be helpful if you are in the 0% capital gains bracket and do not have to pay any federal taxes on this gain. Then, if you want, you can buy back your investment the same day, increasing your cost basis in those investments. If you sell them in the future, the increased cost basis will help reduce long-term capital gains. You do not have to wait 30 days before you buy back this investment—the 30-day rule only applies to losses, not gains.

Note: This non-taxable capital gain for federal income taxes might not apply to your state.

TAX TIP: Remember that marginal tax rates on long-term capital gains and dividends can be higher than expected. The 3.8% surtax can raise the effective rate to 18.8% for single filers with income from $200,000 to $434,550 and 23.8% for single filers with income above $434,550. It can raise the effective rate to 18.8% for married taxpayers filing jointly with income from $250,000 to $488,850 and to 23.8% for married taxpayers filing jointly with income above $488,850.

Calculating Capital Gains and Losses

With all of these different tax rates for different types of gains and losses in your marketable securities portfolio, it’s probably a good idea to familiarize yourself with some of the rules:

• Short-term capital losses must first be used to offset short-term capital gains.
• If there are net short-term losses, they can be used to offset net long-term capital gains.
• Long-term capital losses are similarly first applied against long-term capital gains, with any excess applied against short-term capital gains.
• Net long-term capital losses in any rate category are first applied against the highest tax rate long-term capital gains.
• Capital losses in excess of capital gains can be used to offset up to $3,000 ($1,500 if married filing separately) of ordinary income.
• Any remaining unused capital losses can be carried forward and used in the same manner as described above.

TAX TIP: Please remember to look at your 2018 income tax return Schedule D (page 2) to see if you have any capital loss carryover for 2019. This is often overlooked, especially if you are changing tax preparers.

Please double-check your capital gains or losses. If you sold an asset outside of a qualified account during 2019, you most likely incurred a capital gain or loss. Sales of securities showing the transaction date and sale price are listed on the 1099 generated by the financial institution. However, your 1099 might not show the correct cost basis or realized gain or loss for each sale. You will need to know the full cost basis for each investment sold outside of your qualified accounts, which is usually what you paid for it, but this is not always the case.

3.8% Medicare Investment Tax

The year 2019 is the seventh year of the net investment income tax of 3.8%. It is also known as the Medicare surtax. If you earn more than $200,000 as a single or head of household taxpayer, $125,000 as married taxpayers filing separately or $250,000 as married joint return filers, then this tax applies to either your modified adjusted gross income or net investment income (including interest, dividends, capital gains, rentals, and royalty income), whichever is lower. This 3.8% tax is in addition to capital gains or any other tax you already pay on investment income.

A helpful strategy has been to pay attention to timing, especially if your income fluctuates from year to year or is close to the $200,000 or $250,000 amount. Consider realizing capital gains in years when you are under these limits. The inclusion limits may penalize married couples, so realizing investment gains before you tie the knot may help in some circumstances. This tax makes the use of depreciation, installment sales, and other tax deferment strategies suddenly more attractive.

Medicare Health Insurance Tax on Wages

If you earn more than $200,000 in wages, compensation, and self-employment income ($250,000 if filing jointly, or $125,000 if married and filing separately), the Affordable Care Act levies a special 0.9% tax on your wages and other earned income. You’ll pay this all year as your employer withholds the additional Medicare Tax from your paycheck. If you’re self-employed, plan for this tax when you calculate your estimated taxes.

If you’re employed, there’s little you can do to reduce the bite of this tax. Requesting non-cash benefits in lieu of wages won’t help—they’re included in the taxable amount. If you’re self-employed, you may want to take special care in timing income and expenses (especially depreciation) to avoid the limit.

Charitable Gifts and Donations

When preparing your list of charitable gifts, remember to review your checkbook register so you don’t leave any out. Everyone remembers to count the monetary gifts they make to their favorite charities, but you should count noncash donations as well. Make it a priority to always get a receipt for every gift. Keep your receipts. If your contribution totals more than $250, you’ll also need an acknowledgement from the charity documenting the support you provided. Remember that you’ll have to itemize to claim this deduction, but when filing, the expenses incurred while doing charitable work often is not included on tax returns.
You can’t deduct the value of your time spent volunteering, but if you buy supplies for a group, the cost of that material is deductible as an itemized charitable donation. You can also claim a charitable deduction for the use of your vehicle for charitable purposes, such as delivering meals to the homebound in your community or taking your child’s Scout troop on an outing. For 2019, the IRS will let you deduct that travel at .14 cents per mile.

Child and Dependent Care Credit

Millions of parents claim the child and dependent care credit each year to help cover the costs of after-school daycare while working. Some parents overlook claiming the tax credit for childcare costs during the summer. This tax break can also apply to summer day camp costs. The key is that for deduction purposes, the camp can only be a day camp, not an overnight camp. So, If you paid a daycare center, babysitter, summer camp, or other care provider to care for a qualifying child under age 13 or a disabled dependent of any age, you may qualify for a tax credit of up to 35% of qualifying expenses of $3,000 for one child or dependent, or up to $6,000 for two or more children.

Contribute to Retirement Accounts

If you haven’t already funded your retirement account for 2019, consider doing so by April 15, 2020. That’s the deadline for contributions to a traditional IRA (deductible or not) and a Roth IRA. However, if you have a Keogh or SEP and you get a filing extension to October 15, 2020, you can wait until then to put 2019 contributions into those accounts. To start tax-advantaged growth potential as quickly as possible, however, try not to delay in making contributions. If eligible, a deductible contribution will help you lower your tax bill for 2019 and your contributions can grow tax deferred.

To qualify for the full annual IRA deduction in 2019, you must either: 1) not be eligible to participate in a company retirement plan, or 2) if you are eligible, there is a phase-out from $64,000 to $74,000 for singles and from $103,000 to $123,000 for married taxpayers filing jointly. If you are not eligible for a company plan but your spouse is, your traditional IRA contribution is fully-deductible as long as your combined gross income does not exceed $193,000. For 2019, the maximum IRA contribution you can make is $6,000 ($7,000 if you are age 50 or older by the end of the calendar year). For self-employed persons, the maximum annual addition to SEPs and Keoghs for 2019 is $56,000.

Although contributing to a Roth IRA instead of a traditional IRA will not reduce your 2019 tax bill (Roth contributions are not deductible), it could be the better choice because all qualified withdrawals from a Roth can be tax-free in retirement. Withdrawals from a traditional IRA are fully taxable in retirement. To contribute the full $6,000 ($7,000 if you are age 50 or older by the end of 2019) to a Roth IRA, you must earn $122,000 or less a year if you are single or $193,000 if you’re married and file a joint return.

If you have any questions on retirement contributions, please call us.

Roth IRA Conversions

A Roth IRA conversion is when you convert part or all of your traditional IRA into a Roth IRA. This is a taxable event. The amount you converted is subject to ordinary income tax. It might also cause your income to increase, thereby subjecting you to the Medicare surtax. Roth IRAs grow tax-free and qualified withdrawals are tax-free in the future, a time when tax rates might be higher.

Whether to convert part or all of your traditional IRA to a Roth IRA depends on your particular situation. It is best to prepare a tax projection and calculate the appropriate amount to convert. Remember—you do not have to convert all of your IRA to a Roth. Roth IRA conversions are not subject to the pre-age 59½ penalty of 10%.

Many 401(k) plan participants can convert the pre-tax money in their 401(k) plan to a Roth 401(k) plan without leaving the job or reaching age 59½. There are a number of pros and cons to making this change. Please call us to see if this makes sense for you.

Required Minimum Distributions (RMD)

If you turned age 70½ during 2019, you still have until April 1, 2020, to take out your first RMD. This is a one-time opportunity in case you forgot the first time. The deadline for taking out your RMD in the future will be December 31 of each year. If you do not pay out your RMD by this deadline, you may be subject to a 50% penalty on the amount you were supposed to take out. Starting in 2020 the SECURE Act changed the starting RMD age to 72. If you have any questions on your Required Minimum Distributions please call us.

Other Overlooked Tax Items and Deductions

Reinvested Dividends – This isn’t a tax deduction, but it is an important calculation that can save investors a bundle. Former IRS commissioner Fred Goldberg told Kiplinger magazine for their annual overlooked deduction article that missing this break costs millions of taxpayers a lot in overpaid taxes.

Many investors have mutual fund dividends that are automatically used to buy extra shares. Remember that each reinvestment increases your tax basis in that fund. That will, in turn, reduce the taxable capital gain (or increases the tax-saving loss) when you redeem shares. Please keep good records. Forgetting to include reinvested dividends in your basis results in double taxation of the dividends—once in the year when they were paid out and immediately reinvested and later when they’re included in the proceeds of the sale.

If you’re not sure what your basis is, ask the fund or us for help. Funds often report to investors the tax basis of shares redeemed during the year. Regulators currently require that for the sale of shares purchased, financial institutions must report the basis to investors and to the IRS.

Student-Loan Interest Paid by Parents – Generally, you can deduct interest only if you are legally required to repay the debt. But if parents pay back a child’s student loans, the IRS treats the transactions as if the money were given to the child, who then paid the debt. So as long as the child is no longer claimed as a dependent, the child can deduct up to $2,500 of student-loan interest paid by their parents each year. (The parents can’t claim the interest deduction even though they actually foot the bill because they are not liable for the debt).

Charitable Gift Directly made from IRA – Individuals at least 70½ years of age can still exclude from gross income qualified charitable distributions (QCD) from IRAs of up to $100,000 per year. Please remember to double check on what counts as a qualified charity and distribution before using this tax strategy.

Helpful Tax Time Strategies

Although many deductions were eliminated under the new laws, it might still be helpful to write down or keep all receipts you think are even possibly tax-deductible. Sometimes, taxpayers assume that various expenses are not deductible and do not even mention them to their tax preparer. Don’t assume anything—give your tax preparer the chance to tell you whether something is or is not deductible.

Be careful not to overpay Social Security taxes. If you received a paycheck from two or more employers and earned more than $132,900 in 2019 you may be able to file a claim on your return for the excess Social Security tax withholding.

Don’t forget items carried over from prior years because you exceeded annual limits, such as capital losses, passive losses, charitable contributions and alternative minimum tax credits.

Check your 2018 tax return to see if there was a refund from 2018 applied to 2019 estimated taxes.

Calculate your estimated tax payments for 2020 very carefully. Many computer tax programs will automatically assume that your income tax liability for the current year is the same as the prior year. This is done to avoid paying penalties for underpayment of estimated income taxes. However, in some cases this might not be a correct assumption, especially if 2019 was an unusual income tax year due to the sale of a business, unusual capital gains, the exercise of stock options, or even winning the lottery! A qualified tax preparer could be able to help you with a tax projection for 2020.

Remember that IRS.gov is a valuable online resource for tax information.

Always double check your math where possible and remember it is always wise to consult a tax preparer before filing.

Proactive Tax Planning for 2020

As you know, with the passage of the Tax Cuts and Jobs Act (TCJA), tax brackets, thresholds, and tax rates changed for many filers in 2018. In 2019, taxpayers are still adjusting to some of these changes. For 2020, we will continue to keep our clients updated on any new tax law changes and strategies that could potentially be helpful. For now, please review the 2020 tax tables and it’s never too early to start thinking ahead.

Click tables to view larger

Items Taxpayers Should Consider to Proactively Tax Plan for 2020

1. Prepare a 2020 tax projection – Taxpayers already know the 2020 rates and by reviewing their 2019 situation and all 2020 expectations of income, a qualified tax preparer could be able to help you with a tax projection for 2020.

2. New contribution limits for retirement savings – For 2020, the contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $19,000 to $19,500. The limit on annual contributions to an IRA remains $6,000 ($7,000 for those 50 or older). The catch-up contribution limits for those 50 and over remain unchanged at $1,000.

3. Explore if a potential Roth IRA conversion is helpful for your situation – A Roth IRA can be beneficial in your overall retirement planning. Investments in a Roth IRA have the potential to grow tax-free and they don’t have required minimum distributions during the lifetime of the original owner. Also, Roth IRA assets may pass to your heirs tax-free. Roth conversions include complex details and are not right for everyone, so please call us to see if this makes sense for you.

4. Take advantage of annual exclusion gifts – For 2020, the maximum amount of gift tax exemption is $15,000. This means you can give up to that amount to a family member without having to pay a gift tax. Ideas for gifting can include, contributing to a working child (or grandchild’s) IRA, or gifting to a 529 plan, which is a tax-sheltered plan for college expenses.

5. Consider bunching your charitable donations into a Donor Advised Fund (DAF) – Now is the time to explore if it is helpful for your tax situation to deposit cash, appreciated securities or other assets in a Donor Advised Fund, and then distributing the money to charities over time. Up to 60% of your adjusted gross income can be deductible if given as donations to typical charities.

6. Look into Health Savings Accounts (HSAs) – In general, to qualify to contribute to a health savings account in 2020, you must have a health insurance policy with a deductible of at least $1,350 for single coverage or $2,700 for family coverage. You can contribute up to $3,550 to an HSA if you have single coverage or up to $7,100 for family coverage in 2020, which is slightly more than the 2019 limits. If you’re 55 or older anytime in 2020, you’ll continue to be able to contribute an extra $1,000. HSA’s include complex details and are not right for everyone, so please call us to see if this makes sense for you.

The New SECURE Act and Proactive Tax Planning for 2020

The Setting Every Community Up for Retirement Enhancement (SECURE) Act, was passed by the Senate on December 19, 2019. This bill increased access to retirement plans and also includes some reforms to Defined Contribution (DC) Plans, Defined Benefit (DB) plans, Investment Retirement accounts (IRAs) and 529 plans. Open Multiple Employer Provisions (MEP’s) will be effective January 1, 2021, but many of the other provisions in the law become effective January 1, 2020. The SECURE Act also brought changes for retirement plan holders. We will try to help you with updates as your situation requires this year.

Among the many changes the SECURE Act included, we feel there are three major areas that could affect many client’s retirement planning strategy. These are:

1. One of the most impactful provisions of the SECURE Act is the “death” of the stretch IRA as an estate planning tool for most non-spousal beneficiaries.

If the original owner of an IRA passes away after December 31, 2019, fewer beneficiaries will be able to extend distributions from the inherited IRA over their lifetime. Many will instead need to withdraw all assets from the inherited IRA within 10 years following the death of the original account holder. Exceptions to the 10-year distribution requirement include assets left to a surviving spouse, a minor child, a disabled or chronically ill individual, and beneficiaries who are less than 10 years younger than the decedent. Please note that this new rule will only apply to IRAs inherited after the January 1st, 2020 effective date. All existing inherited IRAs are grandfathered in under the old rules. This NEW change will result in us taking a look at all clients that have accumulated retirement assets to discuss potential strategies that could be best for their situation.

2. Another notable change is the RMD age moved from 70½ to 72.

The Act states that this change applies beginning with IRA account owner who will attain age 70½ on or after January 1, 2020. This was in response to the fact that Americans are currently working and living longer. Congress updated RMD rules to reflect changes in life expectancies.

3. Allowing anyone with earned income the ability to contribute to an IRA after age 70½.

The SECURE Act permanently removes the age limit at which an individual can contribute to a traditional IRA. Previously, an individual could only contribute to ROTH IRAs after age 70½, as they have no age limit. Starting in 2020, the SECURE Act allows anyone that is working and has earned income to contribute to a traditional IRA regardless of age.

Another notable change the SECURE Act will bring is to 529 Plans. These tax-advantaged 529 plans will be allowed to help pay off qualified student loan repayments (up to $10,000 lifetime).

Many provisions of the SECURE Act will be subject to the interpretation of the IRS or other authorities. As always, clients should consider consulting with their personal tax advisor regarding their specific situation.

Determining the most efficient ways to either withdraw or pass to your beneficiaries your accumulated wealth is always an important decision. Our goal is to remain aware of changes that affect our clients and then share those changes with them.

We firmly believe in proactive tax planning and we will review the SECURE Act for proactive tax planning opportunities and share our findings with our clients.

Our goal is to work with clients to explore efficient ways to drawdown retirement savings and transfer wealth. If you would like to discuss your retirement plan and withdrawal strategy, please call us. As always, we appreciate the opportunity to assist you in addressing your financial goals.

Conclusion

Filing your 2019 taxes will continue to include the new tax rates set forth with the Tax Cuts and Jobs Act (TCJA) enacted in 2018 (currently set to expire after 2025). An essential part of maintaining your overall financial health is attempting to keep your tax liability to a minimum.

When filing your 2019 taxes, the rules and laws currently in place did not vary too much from your 2018 taxes. One of our primary goals is to keep you informed of the changes that will be affecting investors like you. We believe that taking a proactive approach is better than a reactive approach — especially regarding income tax strategies!

How long should I keep my records?

This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Registered Representative offering securities and advisory services through Independent Financial Group, LLC (IFG), a registered broker dealer and a registered investment adviser. Member FINRA/SIPC. Financial 1 Wealth Management Group and IFG are unaffiliated entities. Note: The views stated in this letter are not necessarily the opinion of through Independent Financial Group, LLC (IFG), and should not be construed, directly or indirectly, as an offer to buy or sell any securities mentioned herein. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Please note that statements made in this newsletter may be subject to change depending on any revisions to the tax code or any additional changes in government policy. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance is no guarantee of future results. Please note that individual situations can vary. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. Additionally, each converted amount is subject to its own five-year holding period. Investors should consult a tax advisor before deciding to do a conversion. Sources: www.IRS.gov, turbotax.com. Contents Provided by The Academy of Preferred Financial Advisors, Inc 2020© All rights reserved. Reviewed by Keebler & Associates

The post Filing 2019 Income Taxes and Planning for 2020 appeared first on Financial 1 Tax.

Times have certainly changed!

Today the concept of retirement has taken on a new meaning. The cost of living has become very expensive and those who would like to enjoy their mature years are finding that it is becoming less and less financially feasible. In order to realize their dreams, retirees are finding that simply living off of social security and a savings account is not enough.

Social security, which is typically a component of any retirement plan, was never intended to be the sole source of retirement for anybody. To reach any sort of comfortable retirement income, people today will need quite a bit more than what social security can provide. The Social Security Administration recently stated that 96% of American workers are covered by social security, (including non-working spouses who are also eligible for payments). However, the amount you are eligible for can be different depending on when you start to collect. Even though in most circumstances you cannot collect Social Security until age 62, there is an even higher benefit offered to those who wait until age 70 to start. Although social security should be a part of your retirement planning, for purposes of this article, we want to point out that social security will most often not help satisfy someone’s retirement income needs.

Some people have saved their entire lives with the intent of being able to enjoy the golden years, but when putting together a plan for living comfortably from these savings, they now have to take into consideration many factors, including:

Good Strategy

These are just a few of the complex issues that retirees need to consider. A good strategy for approaching and preparing for retirement is through a well-executed, long-term plan. Sadly, the reality for many people is that their lifetime may have included unexpected situations like an untimely death, a divorce, an unfortunate disability, or any one of a number of unpredictable and unpreventable obstacles that changed or altered even the best of intentions. As a result, many people today find themselves in the twilight of their working years having saved less for their retirement than they anticipated and scrambling to find a way to compensate or make up for the cash they will need to realize the retirement they once desired.

Provisions for Individuals Over 50

Those who are in their 50s and 60s without large retirement accounts may not have the time to receive the full benefits from compounding the returns on their investments. Also in today’s low interest rate environment, many of your safer choices will not grow as fast as they would have when interest rates were higher. Your retirement savings can still have the opportunity to grow by the time you need to access your funds. The tax law provides a few provisions for individuals over 50 that are continuing or even starting to save for their retirement. If you are 50 or older you can put up to $6,500 ($1,000 more than younger savers) in your regular IRA or Roth IRA. If you are over 50 years old you can also add an extra $6,000 to a 401(k) plan (compared to your younger co-workers). IRAs and 401(k) plans provide for tax-deferred growth, while Roth IRAs can offer tax-free growth. These options are always attractive for those still working and over age 50, but there are many restrictions and guidelines on who can participate and to what extent. This is an area where we can help. For clients who are interested in learning how to maximize their retirement savings, we always enjoy the opportunity to discuss their specific situation and plans.

Today, many people are delaying their actual retirement date. Every year you continue to work can help your planning in two ways. First, delaying retirement means there is another year you are working and earning an income and saving for retirement. Second, because you are still working, you may not need to use your retirement savings that year for financial help. Delaying your retirement allows your nest egg to hopefully grow for another year.

For many Americans, retirement today can be broken down into four phases:

1. Pre-retirement;
2. Early retirement;
3. Full retirement; and
4. Final retirement.

Let’s take a brief look at each of these stages.

Pre-retirement Phase

Pre-retirement is that time period when you begin to take a look at slowing down and begin to plan your life after your career. This is the time you should ask yourself how much money you will need and how you can make the most of your retirement. As a starting point, most experts suggest that you will not need your full earnings to carry you through retirement but a high percentage of it. Obviously, the percentage is higher if you earn less, and can be lower if you earn more. Although everyone’s situation is different, one of the keys to success is to consider preparing an active budget of your expected expenses in retirement. You can then review how much you have saved and invested to meet your unique situation.

Remember, most people in retirement pare back certain expenses like commuting costs and clothes that are required for work. However, some incur additional expenses such as health care. It is crucial in this phase that you map out what you want your retirement to look like and how and where you expect to live so that you can begin to plan for life after your career has ended. This time period is also helpful to think about setting some goals you can stick to and monitor your cash flow.

Early Retirement Phase

The next stage is the early stage of retirement. During this phase, many people can still have a lot of energy and enthusiasm and therefore can focus on enjoying physical sports (like golf and tennis) and traveling. During this phase, it is important to have a plan for cash flow. It can be very likely that your expenses will be higher in these early years due to potentially more extensive travel and activities.

It is not unusual today for many individuals in this early stage to work on a part-time basis. In addition to traditional work, many people in this stage also still work on boards of trustees and volunteer at not-for-profit organizations.

The increase in life expectancy can affect your decisions during this stage. Also, many people during this stage need to replace or supplement corporate benefits such as life and health insurance and, if you work part time, possibly disability insurance.

The challenges of this early retirement phase are not just financial. They can also be about filling time. Many retired clients find themselves looking for work often part time, simply out of boredom. Although early retirement may sound appealing, it is important to think through the financial and non-financial implications for making this decision. It is essential that during this period that you hold a full review of your estate plan so any unexpected situations do not interrupt the comfort of you or your loved ones. This is another area where we can offer assistance to clients.

Full Retirement Phase

This next stage is the middle of your retirement cycle. By now, you have hopefully realized your travel dreams and fulfilled many of the goals you had planned for in your retirement.

Although you may be in good health, many people during this phase are more likely to decide to slow down and may possibly find more enjoyment in activities that are less fatiguing and slower paced. The hassles of traveling don’t sound as tolerable. Instead, local events and the pursuit of hobbies that are less physically tasking sound more appealing.

During this phase many people belong to groups or clubs that meet regularly and provide social interaction. Your expenses may actually be lower than in the early retirement phase if your activities (such as traveling) have minimized.

In today’s low interest rate environment, many experts are recommending that withdrawals from retirement plans be more conservative than those taken during periods of higher interest rates. This is why we like to sit with clients to help determine an appropriate withdrawal schedule.

Final Retirement Phase

The final years of retirement are the last stage. This is when you may find yourself battling the physical and mental challenges of old age. During this final phase, some retirees move out of their homes and into assisted care facilities or even nursing homes. Many times medical expenses, including prescription drugs, take up a significant share of your monthly income. You can even become restricted in your activities due to physical limitations.

Conclusion

Regardless of your age or which phase you are in or approaching, here are some important things that you need to constantly review and consider:

1. Realize that your cash flow needs can be different for each phase of retirement.

Your early phase and final phase have the potential to have the most expenses. Expenses can usually be lower in the full or pre-retirement stage.

2. People are living longer.

Better health habits, advances in medicine, and many new drugs have extended people’s lives longer than prior generations. It is imperative to monitor and review your investment choices on a regular basis to give yourself the best possibility of meeting the cash flow needs you will require throughout each phase of retirement.

3. It is imperative to periodically rebalance your investment portfolios to reflect the various changing priorities and living patterns as you go through each of these retirement stages.

You should systematically revisit how you can adjust your portfolio based upon your actual life and health changes, goals, needs, objectives, and risk tolerances.

4. It is essential to review your needs for long-term care and other costs (like medical and burial expenses) before and during retirement.

5. It is crucial to constantly monitor your cash distributions from your retirement savings.

We have experienced a significant decline in interest rates over the last decade and that can affect your portfolio. In this low interest rate environment, it is even more essential that you have a strategy for taking distributions from your portfolio. In the past, a larger distribution rate might have been acceptable, however, with today’s low interest rates it is imperative to make sure that your withdrawal rates are reasonable and will be sustainable over the long-term.

The bottom line is that throughout each stage of retirement it is wise to make sure that you plan and monitor. Remember, the only thing that is constant is change!

Our role is to help and assist you through each stage of your retirement. We take great pride and satisfaction in reviewing each of our client’s individual situations and needs. Our goal is to fully understand and review your retirement and estate planning needs. Please call us at 410-908-9293 if you have any questions or need any assistance and we will be happy to help you.

Help us grow!

This year, one of our goals is to offer our services to several other people just like you!

Many of our best relationships have come from introductions from our clients.

Do you know someone who could benefit from our services?

We would be honored if you would:

• Add a name to our mailing list,
• Bring a guest to a workshop,
• Have someone come in for a complimentary financial checkup.

Please call Financial 1 at 410-908-9293 and we would be happy to assist you!

Learn how to turn your savings into lifetime, infaltion-adjusted income.

This article is for informational purposes only. This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice as individual situations will vary. For specific advice about your situation, please consult with a lawyer or financial professional. A Roth IRA distribution is qualified if you’ve had the account for at least five years and/or the distribution is made after you’ve reached age 59 ½. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Please note that rebalancing investments may cause investors to incur transaction costs and, when rebalancing a non-retirement account, taxable events will be created that may increase your tax liability.

The post The Four Phases of Retirement appeared first on Financial 1 Tax.

Special Report!

Tax season has arrived — again. That means that it’s now time to finish and file your tax returns for 2015. This year you have until April 18 to file your federal tax return. (That is not a typo. April 15 is generally Tax Day, but the deadline was pushed back this year in recognition of Emancipation Day, a holiday observed in Washington D.C. to commemorate the signing of the Compensated Emancipation Act).  Because Emancipation Day falls on a Saturday this year, it will be observed on Friday, thus pushing the tax-filing deadline to Monday for most of the nation, the IRS says.

There are some exceptions. The deadline will be Tuesday, April 19, in Maine and Massachusetts, because of Patriots’ Day, a holiday in those states commemorating the battles of Lexington and Concord in 1775.

The year 2015 did not generate major tax law changes. With 2016 being a presidential election year many experts are expecting tax law changes in the future.  Tax planning should always be an essential focus when reviewing your personal situation. However, when planning ahead for 2016 and beyond, you should not count on all tax rules remaining the same forever.  One of our goals as financial professionals is to attempt to point out as many tax savings opportunities and strategies as possible for our clients.  This special report reviews some of the broader recent tax law changes along with a wide range of tax reduction strategies. As you read this report, please note each tax strategy that you think could be beneficial to you. Not all ideas are appropriate for all taxpayers. We always recommend you address any tax strategy with your tax professional to consider how one tax strategy may affect another and calculate the income tax consequences (both state and federal). Remember, tax strategies and ideas that have worked in the recent past might not even be available under today’s tax laws.

Always attempt to understand all the details before making any decisions—it is always easier to avoid a problem than it is to solve one! Remember that you always have the option to do nothing. Again, please discuss any of your ideas with your tax preparer before taking action.

Please note—your state income tax laws could be different from the federal income tax laws. Visit www.sisterstates.com for a wide range of tax information and links to tax forms for all 50 states.  All examples mentioned in this report are hypothetical and meant for illustrative purposes only.

Tax Law “Extenders”

On Dec. 18, 2015, President Obama signed into law a package of tax extenders called “The Protecting Americans from Tax Hikes Act of 2015,” or PATH.  Tax extenders are nothing new. Historically, as tax provisions expire, extenders are put forward to temporarily keep them active. While PATH helped extend some provisions, it did nothing to develop the kind of certainty that many in the business community wants when planning for the future. The only change included in PATH was that some of the tax extenders were made permanent, including a few that benefit individuals as well as businesses.

Here are some of the highlights from PATH:

For businesses:  there are enhancements and permanent extensions to the Research and Development Tax Credit; the Code Sec. 179 expensing limitation of $500,000 and the $2 million phase-out limit are retroactively and permanently extended, and both are indexed for inflation for tax years beginning this year; and Bonus Depreciation, which allows retailers and restaurants to initially depreciate half of remodeling and improvement fees.

For individuals:  the Child Tax Credit, American Opportunity Tax Credit and the Earned Income Tax Credit are all strengthened and made permanent.

Moving forward into 2016, here are some other notable items from the PATH Act:

• A deduction for state and local general sales tax in lieu of state income tax is retroactively extended and made permanent. You can deduct either your state and local income taxes or your state and local general sales taxes—but not both. This is a very important break for millions of people who live in states with no state income tax.

• Individuals at least 70½ years of age may now exclude from gross income qualified charitable distributions from IRAs of up to $100,000 per year. Please remember to double check on what counts as a qualified charity and distribution before using this tax strategy.

• Permanent deduction for educator expenses. This rule expired at the end of 2014 and is now permanent. An eligible educator can deduct as much as $250 of unreimbursed costs of classroom supplies, such as books, computer equipment and software. This applies to “a kindergarten through grade 12 teacher, instructor, counselor, principal or aide in school for at least 900 hours during a school year,” an IRS publication says. This is especially valuable since they can deduct it from their total income, using line 23 on Form 1040, rather than as a miscellaneous itemized deduction, the IRS says.

Contribute to Retirement Accounts

If you haven’t already funded your retirement account for 2015, consider doing so by April 18, 2016. That’s the deadline for contributions to a traditional IRA (deductible or not) and a Roth IRA. However, if you have a Keogh or SEP and you get a filing extension to October 15, 2016, you can wait until then to put 2015 contributions into those accounts. To start tax-free compounding as quickly as possible, however, try not to delay in making contributions.  Making a deductible contribution will help you lower your tax bill for 2015 and your contributions will compound tax-deferred.

To qualify for the full annual IRA deduction in 2015, you must either: 1) not be eligible to participate in a company retirement plan, or 2) if you are eligible, you must have adjusted gross income of $61,000 or less for singles, or $98,000 or less for married couples filing jointly. If you are not eligible for a company plan but your spouse is, your traditional IRA contribution is fully-deductible as long as your combined gross income does not exceed $183,000. For 2015, the maximum IRA contribution you can make is $5,500 ($6,500 if you are age 50 or older by the end of the year). For self-employed persons, the maximum annual addition to SEPs and Keoghs for 2015 is $53,000.

Although choosing to contribute to a Roth IRA instead of a traditional IRA will not reduce your 2015 tax bill (Roth contributions are not deductible), it could be the better choice because all withdrawals from a Roth can be tax-free in retirement. Withdrawals from a traditional IRA are fully taxable in retirement. To contribute the full $5,500 ($6,500 if you are age 50 or older by the end of 2015) to a Roth IRA, you must earn $116,000 or less a year if you are single or $183,000 if you’re married and file a joint return.

The amount you save from making a contribution will vary. If you are in the 25% tax bracket and make a deductible IRA contribution of $5,500, you will save $1,375 in taxes the first year. Over time, future contributions could save you thousands, depending on your contribution, income tax bracket and the number of years you keep the money invested.

Included in this report is a table of retirement plan limits for both 2015 and 2016.  If you have any questions on retirement contributions, please call us at 410-908-9293.

Roth IRA Conversions

A Roth IRA conversion is when you convert part or all of your traditional IRA into a Roth IRA. This is a taxable event. The amount you converted is subject to ordinary income tax. It might also cause your income to increase, thereby subjecting you to the Medicare surtax.  Roth IRAs grow tax-free and withdrawals are tax-free in the future, a time when tax rates might be higher.

Whether to convert part or all of your traditional IRA to a Roth IRA depends on your particular situation. It is best to prepare a tax projection and calculate the appropriate amount to convert. Remember—you do not have to convert all of your IRA to a Roth. Roth IRA conversions are not subject to the pre-age 59½ penalty of 10%.

Another benefit of a Roth IRA conversion is that it allows you the flexibility to re-characterize your conversion by October 15th of the following tax year. This gives you the benefit of hindsight. If you do a conversion and the value of the Roth IRA goes down, you can change your mind and re-characterize it back to the traditional IRA without any tax consequence.

Consider using multiple Roth IRA accounts. If you decide to re-characterize, you must use all of the assets of a particular Roth IRA. You have the ability to choose which Roth IRA to re-characterize, but you do not have the right to re-characterize some of the investments within a Roth IRA. For example, if you use multiple Roth IRA accounts and one of the accounts drops in value while the others increase, you can switch the under-performing account back to a traditional IRA tax and penalty free while still keeping the other Roth IRAs.  Roth 401(k)s, first available in 2006, continue to evolve. ATRA allows plan participants to convert the pre-tax money in their 401(k) plan to a Roth 401(k) plan without leaving the job or reaching age 59½. There are a number of pros and cons to making this change. Perhaps the biggest downside to an in-plan conversion is that there is no way to re-characterize the conversion. Your converted amount stays inside of the 401(k). Please call us at 410-908-9293 to see if this makes sense for you.

Inherited IRAs

Be careful if you inherit a retirement account. In many cases, the decedent’s largest asset is a retirement account. If you inherit a retirement account, such as an IRA or other qualified plan, the money is usually taxable upon receipt. There is no step-up in basis on investments within retirement accounts and therefore most distributions are 100% taxable.

Non-spouse beneficiaries usually cannot roll over an inherited IRA to their own IRA, but the solution to this problem can be easy: establish an Inherited IRA, also known as a “stretch” IRA. Non-spouse beneficiaries of any age are allowed to start their RMDs the year following the year the owner died and stretch them out over their own life expectancy. This will reduce your income taxes significantly compared to having all of the IRA taxed in one year.

These tax laws are very complicated and you must implement the requirements carefully to avoid any unnecessary income taxes and penalties. Please contact us at 410-908-9293 before receiving any distributions from a retirement account you inherit.  Remember—it is easier to avoid a problem than it is to solve one!

Required Minimum Distributions (RMD)

If you turned age 70½ during 2015, you still have until April 1, 2016, to take out your first RMD. This is a one-time opportunity in case you forgot the first time. The deadline for taking out your RMD in the future will be December 31 of each year. If you do not pay out your RMD by this deadline, you will be faced with a 50% penalty on the amount you should have taken.

If you have any questions on your Required Minimum Distributions please call us at 410-908-9293.

Note:  you usually do not have to take out an RMD from your current employer’s retirement account as long as you work there and don’t own more than 5% of the company.  See your plan administrator if you have any questions.

2015 Tax Rates and Income Brackets

There are still seven federal income tax brackets for 2015.  The lowest of the seven tax rates is 10%, while the top tax rate is 39.6%. The income that falls into each is scheduled to be adjusted each year for inflation. Typically, it is advisable to file jointly if you’re married, because married couples who file separate returns tend to face higher taxes.  Heads of household get wider income brackets than single filers, meaning their taxes are a bit lower. As a single filer, you will pay a top ordinary tax rate of 39.6% if your taxable income is more than $413,200 ($464,850 for married couples filing jointly). For higher income earners, the net investment income tax might not only take a bite out of taxpayers’ bank accounts, but it could also cause headaches for their tax professionals as they work through the tax regulations. For 2015, there is a phase-out of itemized deductions and personal exemptions for taxpayers whose income is greater than $305,050 if married filing jointly or $254,200 if single.

Not sure how to file? Then ask your tax preparer or review IRS Publication 17, Your Federal Income Tax, which is a complete tax resource. It contains helpful information such as whether you need to file a tax return and how to choose your filing status.

2015 Standard Deduction Amounts

Most taxpayers claim the standard deduction. The amounts for each of the filing statuses are adjusted annually for inflation. For taxpayers younger than age 65, the standard deduction for married joint filers is double the single amount. Head of household taxpayers get a larger deduction since they are supporting dependents. Older taxpayers and visually impaired filers get bigger standard deduction amounts.

Investment Income

Recent tax laws permanently raised rates on long-term capital gains and dividends for top-bracket taxpayers.  People that have enough income to pay taxes at the 39.6% rate will pay 20% in 2015 on the net long-term capital gains and dividends.

One tax strategy is to review your investments that have unrealized long-term capital gains and sell enough of the appreciated investments in order to generate enough long-term capital gains to push you to the top of your 15% Federal income tax bracket. This strategy could be helpful if you do not have to pay any Federal taxes on this gain. Then, if you want, you can buy back your investment the same day, increasing your cost basis in those investments. If you sell them in the future, the increased cost basis will help reduce long-term capital gains. You do not have to wait 30 days before you buy back this investment—the 30-day rule only applies to losses, not gains. Note: this non-taxable capital gain for federal income taxes might not apply to your state.

Remember that marginal tax rates on long-term capital gains and dividends can be higher than expected. The 3.8% surtax raises the effective rate on tax-favored gains and dividends to 18.8% for filers affected that are below the 39.6% tax bracket and 23.8% for people in the highest tax bracket.

Calculating Capital Gains and Losses

With all of these different tax rates for different types of gains and losses in your marketable securities portfolio, it’s probably a good idea to familiarize yourself with some of the rules:

• Short-term capital losses must first be used to offset short-term capital gains.
• If there are net short-term losses, they can be used to offset net long-term capital gains.
• Long-term capital losses are similarly first applied against long-term capital gains, with any excess applied against short-term capital gains.
• Net long-term capital losses in any rate category are first applied against the highest tax rate long-term capital gains.
• Capital losses in excess of capital gains can be used to offset up to $3,000 of ordinary income.
• Any remaining unused capital losses can be carried forward and used in the same manner as described above.
• Please remember to look at your 2014 income tax return Schedule D page 2 to see if you have any capital loss carryover for 2015. This is often overlooked, especially if you are changing tax preparers.

Please try to double-check your capital gains or losses. If you sold an asset outside of a qualified account during 2015, you most likely incurred a capital gain or loss. Sales of securities showing the transaction date and sale price are listed on the 1099 generated by the financial institution.  However, your 1099 might not show the correct cost basis or realized gain or loss for each sale.  You will need to know the full cost basis for each investment sold outside of your qualified accounts, which is usually what you paid for it, but this is not always the case.  Remember:  the tax rates on long-term capital gains were permanently increased in 2013. 

3.8% Medicare Investment Tax

The year 2015 commemorates the third year of the net investment income tax of 3.8%. It is also known as the Medicare surtax. If you earn more than $200,000 as a single taxpayer or $250,000 as a married joint return, then this tax applies to either your modified adjusted gross income or net investment income (including interest, dividends, capital gains, rentals, and royalty income), whichever is lower.  This 3.8% tax is in addition to capital gains or any other tax you already pay on investment income.

At this time, there’s little you can do to reduce this tax for 2015, but you can try to reduce its impact in 2016.  A helpful strategy is to pay attention to timing, especially if your income fluctuates from year to year or is close to the $200,000 or $250,000 amount. Consider realizing capital gains in years when you are under these limits. The inclusion limits penalize married couples, so realizing investment gains before you tie the knot may help in some circumstances. This tax makes the use of depreciation, installment sales, and other tax deferment strategies suddenly more attractive.

Medicare Health Insurance Tax on Wages

If you earn more than $200,000 in wages, compensation, and self-employment income ($250,000 if filing jointly, or $125,000 if married and filing separately), the Affordable Care Act also levies a special 0.9% tax on your wages and other earned income. You’ll pay this all year as your employer withholds the additional Medicare Tax from your paycheck. If you’re self-employed, be sure to plan for this tax when you calculate your estimated taxes.

If you’re employed, there’s little you can do to reduce the bite of this tax. Requesting non-cash benefits in lieu of wages won’t help—they’re included in the taxable amount.  If you’re self-employed, you may want to take special care in timing income and expenses (especially depreciation) to avoid the limit.

Medical Expenses

Deducting medical expenses in 2015 has become a little more difficult. Prior to 2013, anyone could deduct medical expenses once they passed 7.5% of your adjusted gross income (AGI). For 2015, you can only deduct them to the extent they exceed a whopping 10% of your AGI. If you or your spouse is over age 65, the old 7.5% floor still stands until 2017.

This higher floor makes the bunching of medical expenses even more necessary. If you have big medical expenses, try to pay them in a year when you can take advantage of the deduction. Medical expenses are deductible in the year you pay them, not necessarily when you incur them.  For example, if your children need braces on their teeth and you are making payments over time to the orthodontist, you may never get a deduction for the expense. However, if you pay it all in one year, you might pass the 10% floor and get some consolation in the form of a tax deduction.

Energy Credits

You can still get an energy efficiency tax credit for qualifying energy-efficient products such as solar hot water heaters, solar electric equipment and wind turbines. The credit is 30% of the cost of these products you installed in or on your home.  There is no limit to the amount of credit you can take, and you can carry forward any unused credit to future tax years. This credit was extended to 2016 and can be claimed by filing Form 5695 with your tax return.

Charitable Gifts and Donations

When preparing your list of charitable gifts, remember to review your checkbook register so you don’t leave any out.  Everyone remembers to count the monetary gifts they make to their favorite charities, but you should count noncash donations as well. Make it a priority to always get a receipt for every gift. Keep your receipts. If your contribution totals more than $250, you’ll also need an acknowledgement from the charity documenting the support you provided. Remember that you’ll have to itemize to claim this deduction, but when filing, the expenses incurred while doing charitable work often is not included on tax returns.

You can’t deduct the value of your time spent volunteering, but if you buy supplies for a group, the cost of that material is deductible as an itemized charitable donation. Similarly, if you wear a uniform in doing your good deeds (for example, as a hospital volunteer or youth group leader), you can also count the costs of that apparel and any cleaning bills as charitable donations.

You can also claim a charitable deduction for the use of your vehicle for charitable purposes, such as delivering meals to the homebound in your community or taking your child’s Scout troop on an outing. For 2015, the IRS will let you deduct that travel at 14 cents per mile.

Child and Dependent Care Credit

Millions of parents claim the child and dependent care credit each year to help cover the costs of after-school day care while working. Some parents overlook claiming the tax credit for child care costs during the summer. This tax break also applies to summer day camp costs. The key is that for deduction purposes, the camp can only be a day camp, not an overnight camp.

Remember the dual nature of the credit’s name: child and dependent. If you have an adult dependent that needs care so that you can work, those expenses can possibly be claimed under this tax credit.

The Health Insurance Mandate

The Patient Protection and Affordable Care Act requires that you must carry a minimum level of health insurance for yourself, your spouse and your dependents. If you fail to do so, you could possibly pay a fine. This fine in 2015 could be up to 2% of your yearly income or $325 per person ($162.50 per child under 18) for the year, with a maximum of $975, whichever is higher. These penalties are scheduled to increase in 2016. This is a newer item on your 2015 tax return, because the mandate began in 2014.

Other Overlooked Tax Items and Deductions

Reinvested Dividends – This isn’t a tax deduction, but it is an important calculation that can save investors a bundle.  Former IRS commissioner Fred Goldberg told Kiplinger magazine for their annual overlooked deduction article that missing this break costs millions of taxpayers a lot in overpaid taxes.

Many investors have mutual fund dividends that are automatically used to buy extra shares. Remember that each reinvestment increases your tax basis in that fund. That will in turn reduce the taxable capital gain (or increases the tax-saving loss) when you redeem shares. Please keep good records. Mark Luscombe, Principal and Federal Tax Analyst for Wolters Kluwer Tax & Accounting says, “A lot of people with reinvested dividends fail to add those previously taxed dividends to their basis in determining the taxable gain on the sale of a stock.” Forgetting to include reinvested dividends in your basis results in double taxation of the dividends—once in the year when they were paid out and immediately reinvested and later when they’re included in the proceeds of the sale.

Don’t make that costly mistake.

If you’re not sure what your basis is, ask the fund or us for help. Funds often report to investors the tax basis of shares redeemed during the year. In 2012, regulators started requiring that for the sale of shares purchased, financial institutions must report the basis to investors and to the IRS.

Student-Loan Interest Paid by Parents – Generally, you can deduct interest only if you are legally required to repay the debt. But if parents pay back a child’s student loans, the IRS treats the transactions as if the money were given to the child, who then paid the debt. So as long as the child is no longer claimed as a dependent, the child can deduct up to $2,500 of student-loan interest paid by their parents each year. And he or she doesn’t have to itemize to use this money-saver. (The parents can’t claim the interest deduction even though they actually foot the bill because they are not liable for the debt).

Helpful Tax Time Strategies

• Write down or keep all receipts you think are even possibly tax-deductible. Many taxpayers assume that various expenses are not deductible and do not even mention them to their tax preparer. Don’t assume anything—give your tax preparer the chance to tell you whether something is or is not deductible.
• Be careful not to overpay Social Security taxes. If you received a paycheck from two or more employers, and earned more than $118,500 in 2015, you may be able to file a claim on your return for the excess Social Security tax withholding (this amount is currently scheduled to stay the same for 2016).
• Don’t forget deductions carried over from prior years because you exceeded annual limits, such as capital losses, passive losses, charitable contributions and alternative minimum tax credits.
• Check your 2014 tax return to see if there was a refund from 2014 applied to 2015 estimated taxes.
• Calculate your estimated tax payments for 2016 very carefully. Most computer tax programs will automatically assume that your income tax liability for the current year is the same as the prior year. This is done in order to avoid paying penalties for underpayment of estimated income taxes. However, in many cases this is not a correct assumption, especially if 2015 was an unusual income tax year due to the sale of a business, unusual capital gains, exercise of stock options, or even winning the lottery!
• Remember that gov is an online resource that has everything you need to help file your tax return.
• Always double check your math where possible!

Conclusion

Even though 2015 offered a fairly stable tax environment, an essential part of maintaining your overall financial health is attempting to keep your tax liability to a minimum. Managing wealth involves careful planning and keeping updated and informed of any changes that affect investors.

Looking ahead to 2016, taxpayers need to keep a watchful eye on the Presidential election.  Several leading candidates from both sides have already announced some suggested proposals that would affect investments, estate planning and retirement planning through changes in the tax laws. Although these proposals are not likely to be enacted into law in their current form, they still need to be monitored. One of our primary goals is to keep you informed as tax laws that affect investors change.

We hope that all these tax laws and changes do not confuse you.  We believe that taking a proactive approach is better than a reactive approach—especially regarding income tax strategies!

Remember—if you ever have any questions regarding your finances, please be sure to call us first before making any decisions. We pride ourselves in our ability to help clients make decisions! Many times there is a simple solution to your question or concern.  Don’t worry about things that you don’t need to worry about!

P.S.  Some humorists after filing taxes have suggested that it might have been easier to just use this 1040EZ-ALL form. As one famous comedian once said, “I put all my money into taxes.  They’re the only thing that’s sure to go up!”

This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice.  ­We suggest that you discuss your specific tax issues with a qualified tax advisor.

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Financial 1 Wealth Management Group
10211 Wincopin Circle
Suite 620
Columbia, MD 21044-3431

Note:  The views stated in this letter are not necessarily the opinion of Financial 1 Tax Services. and should not be construed, directly or indirectly, as an offer to buy or sell any securities mentioned herein.  Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed.  Please note that statements made in this newsletter may be subject to change depending on any revisions to the tax code or any additional changes in government policy. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance is no guarantee of future results. Please note that individual situations can vary.

Sources: Wall Street Journal, www.IRS.gov, CCH Tax Briefings

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