Remember when they were doing direct deposit or mailing a paper check? Well someone convinced someone that prepaid debit cards were a better idea. I won’t wax philosophical on the fact that you can’t usually pay rent with a debit card. Instead, I will link to this article from The Tax Girl letting you know that debit card is legit…so don’t throw it away!
Remember when I talked about college students who are dependents (or basically any child over 16) not being eligible for the dependent EIP or their own EIP? Well, that applies to adult dependents too. So if you’re claiming your parent as a dependent and they are wondering where their stimulus money is—it isn’t coming. Because they are a dependent over the age of 16. Yeah—this is a drag.
What’s not a drag is that I have been moving through the returns and Cat may be coming back part time starting next week. Can I get a hallelujah?!
And we are open by appointment for document drop off, return review and signature, and for new client intake appointments.
That’s about it for today!
It’s Thursday and, after a fairly productive start to the week and a really hectic Wednesday, I am working from home. I have a 2-hour class today and I also needed to catch up on reading and administrative tasks.
The tax returns, however, keep on trucking. I’ll be back in the office tomorrow (Friday) working on returns. I’m still at the pile that came in in mid-March, which (if you have been keeping up with this blog) is most of them. But I’m finally seeing light at the end of the tunnel! I still expect to get most of the returns that normally would not have been on extension filed by the end of this month.
I am still planning on opening the office by appointment only beginning Tuesday afternoon, May 19th. I have already booked a few appointments so if you are wanting an appointment in May (and not in June) it’s best to call or e-mail and book now.
You can also call or e-mail if you are a client with a question about your Economic Impact Payment. I’ve been answering those as I can and I appreciate everyone’s understanding concerning the fact that while I have a lot of information on the process, I have absolutely no control over the IRS, the Treasury Department, or their tools (electronic or human).
I am still urging everyone to stay home to the greatest extent possible and to use e-mail, the phone, Zoom, the secure portal, or USPS/courier to communicate with me.
Enjoy your weekend everyone!
#fullambo out
Wow! That’s all I can say. This blog post is late because I have managed to string together three productive work days in a row and it feels like it’s gonna hold through the rest of the week!
So, where are we at? Unfortunately we are still in early to mid-March as far as return processing goes. That said, Cat is coming to pick up the last pile of returns for scanning this week and I am moving through the piles. I am still fiddling with some of the more complicated returns but I’m working on those in tandem with some of the more straightforward ones. The short version is, returns are getting finished.
This is the first time this year I have felt like tax season is working. The first time I have felt like it’s actually tax season and things are working the way they are supposed to—stacked up but moving.
I will be working on returns the rest of this week and back in and working next week as well. I don’t have Cat available for data entry right now (she can’t do that from home) but if you’ve been with me any length of time you know how fast I type. I’ll get ’em done. Have a great week and enjoy the weekend.
#fullambo out
In case you missed the memo, NM Governor Michelle Lujan Grisham (a.k.a. Notorious MLG), has extended the stay-at-home order through May 15th. Cat and I are going to continue to honor that by Cat staying at home. That means no phone support for me. That means leave a message! I am usually at the office (although I will admit that “gardener’s hours” are starting to kick in) and I stop work to pick up phone messages a few times a day.
The backlog is slowly clearing. That means, for those of you whose returns still haven’t made it into the office, we will be ready to start accepting new paperwork soon. So here’s the plan—
Whether or not the stay-at-home is extended beyond May 15th, I will re-open the office for document drop offs by appointment only on Tuesday, May 19th. My 24th wedding anniversary is Monday the 18th so I’ll probably take that day off. If you wish to make an appointment to drop off your tax return documents or missing paperwork (K1s, corrected broker 1099s, etc.), please just call or e-mail and I or Cat will get back to you and will set you up!
I will probably re-open the office to new clients at the beginning of June. We will still be, to the greatest extent possible or required, limiting in-person visits to the office. Re-opening to new clients simply means that I will once again be accepting inquiries from new clients. So, if you know anyone who hasn’t filed but wants to, June is when I’ll be accepting referrals again. That should be plenty of time to meet the July 15th filing deadline.
Thanks to all of you for hanging in there through this chaotic tax season with me!
#fullambo out
When, where, how, I don’t know yet, but remember yesterday’s post where I mentioned the “donut hole” for college-age dependents? Two Michigan senators have introduced legislation to address that and it will probably be part of a larger Phase 4 relief package according to Kay Bell at Don’t Mess with Taxes.
This is me, showing you how to hold onto some of your money (or to mitigate the tax consequences of using it)…
Recent legislation has suspended RMDs for 2020. If you haven’t already taken your RMD for 2020, you don’t have to. This includes RMDs from inherited IRAs.
You know what else got suspended? RMDs that were required by April 1, 2020 because the taxpayer turned 70.5 in 2019. Yep, so if you had to take your very first RMD in 2019, you actually had until April 1, 2020 to take it and now you don’t have to take it at all. Great if you happened to forget about it!
And remember, if you are turning 70.5 in 2020 your RMD age was increased to 72 (by the SECURE Act) so you don’t have a “first” RMD requirement this year. You take your first RMD by April 1 the year you turn 72.
But, Amber, what if I did take my RMD? Well, there might be some relief for you too. You have 60 days to roll that money back into your account or into an IRA (but you are only allowed one of these rollovers in a 12-month period, so be careful if you’ve done one recently). There’s a lot of fine print on this so it’s best to talk with either your investment adviser or an investment adviser you can trust. I happen to know one. Feel free to use the form on the home page or send me an e-mail if you would like his contact details. He can answer your questions, help you determine if you are eligible for the 60-day rollover, and can help you set up an IRA if you are allowed to put your funds back but maybe want a new account instead of, say, your employer’s 401(k).
The deadline for making deductible contributions to your IRA has been extended to July 15, 2020 to coincide with the extended filing deadline. So if you haven’t filed your return yet you can still tweak your contribution (maybe contribute your Economic Impact Payment if you are sure you won’t need it). If you’ve already filed your return I expect you can still make an additional payment through July 15 and simply amend your return to reap the additional tax benefits. Please bear in mind that I have no official guidance on this specifically related to the CARES Act. It just seems logical that you would be able to amend your return to take advantage of the later contribution deadline. Remember, however, that amended returns must be filed on paper and if you use a paid preparer you will be charged for the work. You may even be charged more than you would save in taxes. It’s important to do the math. And it’s really important not to ask your #taxpro to do the math for you right now. I recommend waiting until at least mid-May to give us a chance to get through the returns on our desks (most of us are still working like the deadline wasn’t extended) and until some of this small business loan business has settled down (more on that in a future post).
The CARES Act also provides some help if you need to take money out of your IRA or 401(k).
You can take out up to $100,000 from your IRA penalty free. Not tax free! But not subject to the 10% penalty for early withdrawal if you are under age 59.5. You can also include this income in three equal parts over three years instead of all in tax year 2020. That can help you use your money and stay in a lower tax bracket! And, in an unprecedented move, you also have three years to put some or all of that money back should your circumstances change.
If you are allowed to take a loan from your 401(k) the amount has been increased to a maximum of $100,000 (from $50,000). The due date for repayment has also been delayed for one year.
Please note that these must be “COVID-19 Related” distributions or loans. It is important to consult your IRA trustee/custodian (for an IRA distribution) or your company’s plan administrator and/or plan custodian (for 401(k) loans and distributions) to ensure that you meet the criteria for the distribution and to ensure you understand all of the requirements (the fine print). They can’t give advice on the tax consequences (how much to withhold, etc.) but they can tell you if you qualify for the COVID-19 distribution based on your specific circumstances and give other information related to your specific investments or plan. Finally, considering the state of the stock market right now, it may be best to avoid selling stocks that are in your retirement accounts right now. I mean, you want to buy low, sell high, not the other way around. So if you can avoid cashing out, it is probably best do try to ride this chaos out without selling low.
#fullambo out
They’re coming! Payments are supposed to start “within the next three weeks.” As to exactly what that means, your guess is probably not much better than mine. If you filed a 2018 and/or 2019 tax return and got a refund via direct deposit, your payment will be the first to be rolled out and you don’t have to do anything except wait for it to hit your bank account. But here’s what I know with respect to non-filers and everything else…
Finally, some people are saying “well, this won’t do me much good” and have asked about donating their payments. Of course you can! Here’s a list of some of the places I like to donate (in no particular order):
I also know that New Mexico’s school districts could use some help because they weren’t ready to pay for the cost of converting everyone to remote learning. The Navajo Nation and many of the pueblos are in dire need of help as well. If you are outside of New Mexico I recommend your local food banks, schools, local PBS, local arts organizations (who may be trying to help performing artists who are out of work), and charities that support your area’s indigenous populations.
Update: If you are reading this after you got my e-mail I just realized I forgot to update the subject line of the e-mail. Same name. Same website. 🙂
This post is mainly for clients to let them know what I will be working on this week in the office.
As you can see from this list there’s not a lot of time available for processing “regular” returns. Once the really old, really complex ones are finished, I will be getting back to what is still in the office. The earliest date on those is 3/6. The latest came in around 3/20. A couple may have come in later. If you are reading this, you may have also read the e-mail that says that I work much more slowly without Cat in the office helping. She is doing what she can from her home office and as this situation evolves I am working on processes that allow her to do even more while still maintaining the necessary security precautions.
I am doing my best to continue processing returns on a first-in, first-out basis. I want to thank all of you who have let me know it is OK to extend your returns through October 15th and I will be filing those extensions probably in May (we have until July 15th).
#fullambo out #stayfrosty
I recently read that 95% of small businesses fail within the first 5 years due to either bad management, under capitalization, or some combination of the two. Tax issues for small business owners have the same roots. Bad record keeping is often a sign of bad management. Mileage is one of the most highly scrutinized and most common areas on which small businesses are examined (audited). If you are a small business owner who isn’t keeping good mileage records you may be leaving money on the table. Worse, if you are audited, legitimate business mileage expenses may be disallowed because of your failure to keep adequate records.
The Self Help tab of the Tax Therapy website (Get Organized and Get Answers) offers additional resources to help you track and substantiate your business mileage. In a nutshell, your business mileage log should be contemporaneous (done at about the same time or shortly after you make the drive) and should show the date of the trip, the business purpose of the trip, and the miles driven. It is really common for people to not record the business purpose of the trip on the mileage log. It’s a lot easier to do this when you record the miles than it is to try to re-build that from an appointment calendar!
Finally, a great way to record your starting and ending odometer readings for your annual mileage total is to take a picture of your odometer with your phone on January 1 and again on December 31. If you haven’t taken a picture of your odometer this year, it’s not too late. It won’t be perfect, but it will be close and it will help you get into a really good habit! I hope that one of your New Year’s Resolutions, if you are a small business owner, is to improve your record keeping! It’s easy to do once you make a habit of it. And it’s one of the simplest ways to make sure your start up stays up!
I mentioned in the last post and the one before that that during tax season we require a non-refundable deposit at the time of your intake appointment. Some of you may be wondering why we do that. The short answer is that one tax season I got burned by several “clients.” They came in during season to have their taxes prepared and when they didn’t like the results or didn’t like the amount of follow up and due diligence I was doing they decided to go elsewhere. This was after I had already done a lot of work on their returns. So 1) I was not paid for my time and 2) I was not able to take on clients who really did want to work with me. Lesson learned.
“Onboarding” makes the process sound super complicated, but it really isn’t. All paid preparers have to do a certain amount of due diligence for each tax client. At a minimum we have to check your ID to ensure you are who you say you are and collect the information necessary to prepare your tax returns. At a new client intake appointment (what happens when you get onboarded during tax season) we do the following:
During the off season I am happy to meet with potential clients and do an ID check, return review, and basic client interview for free. I am happy to spend some time discussing your needs and expectations.. We then send you a reminder at the beginning of tax season to request an organizer. In the meantime, if you have found someone else or have decided to do your own taxes and don’t call for the organizer, it’s not really a problem. We are sorry we didn’t earn your business, but we understand.
During tax season we are less understanding. The preliminary work required to bring in a new client takes 30 minutes to an hour (sometimes more if the tax situation involves a business or complex investments). During tax season our work time is limited and much more valuable (it’s like surge pricing for Uber). So, if we are going to spend the time getting to know you and your situation we want to make sure that you are serious enough about having us prepare your tax returns that you get all the way through the e-filing process and that if you don’t we still get paid for the time spent processing your return.
I’ve said it before but it bears repeating. Tax Therapy is a small business and this is how I earn my living. I appreciate the opportunity to show you just how valuable a good #taxpro can be but to make my business work, I have to stick to the processes and policies that work for me. Right now we are still accepting new clients with a non-refundable deposit. If you are still looking for a #taxpro and would like to schedule an intake appointment please get in touch!