Stu’s Letter to the editor – Newburyport Daily News
I love Newburyport. My 8 month pregnant wife and 10 year old son Drew moved here in January of 2005 in about 6 feet of snow right before the 3rd Patriots Super Bowl Victory.
Since then, the city has embraced us and we have made so many lifelong friends in this amazing community. We found out shortly thereafter that not all was great, specifically as it pertained to our schools and facilities for seniors. It is for this reason I write to you today.
You see, we consider our beautiful seaside port a world class city, an oasis of sorts. But it cannot possibly be that way if we do not take care of our children and our seniors. Currently our kids are going to schools that are falling apart, are meant for fewer kids, and are in desperate need of updating. Every year the NEF (Newburyport Education Foundation) holds fundraisers to upgrade the woefully inadequate technology in our schools. Our seniors barely have any place to go to recognize some sort of community of their own.
For a city with so many families and seniors, something has to give. There are 3 projects to tackle: a new Bresnahan School ($38 million), a remodeled Nock middle school ($27 million), and a new senior center ($6.5 million). The cost of the first 2 will be subsidized by the state to the tune of 50%. I also could not believe it when I read the city made a promise over 30 years ago to build a senior center. It is LONG overdue, and the time is now for the fastest growing segment of our community.
As a local financial advisor and CPA, the math on these projects is extremely favorable. I do understand seniors and other families on a tight, fixed budget. I work with many people like this all the time. But these school projects will be subsidized by the state at close to 50% of cost! What a deal. Interest rates are historically at the lowest they have ever been. The construction costs can be minimized by putting the project out to bid in a very competitive environment. The new construction will be built with “green” initiatives in mind, thus the projects will be far more environmentally friendly, leading to reduced operating costs going forward! This is most exciting to me.
Our family is now 5, with 2 wonderful girls age 7 and 3. We feel fortunate to part of the River Valley Charter School Charter School community, but that does not minimize the importance of these projects in our minds. Progress is what has made our country great, and the same is true for our seaside city. We need to progress and bring our educational facilities and senior center into the 21st century. The time is now and it is long overdue. Please vote YES on June 5th and take care of our children and seniors! They certainly deserve it!
For many of us, the tax season ends with a sigh of relief. Believe me, I understand. But if you can catch your breath and make time to plan for next year’s taxes now, you’ll save yourself time and money. This is a large area to cover, but I’ve put together some of the more common scenarios that can be helped by good planning. Have a look to see if any of these apply to you. Feel free to contact me, Stu Steinberg, if you have questions about your situation
1) You are a New Business Owner
If you start a new business that is profitable right out of the gate, consider paying taxes on quarterly installments. It’s the best way to stay on top of what you owe. Tax situations change all the time, especially when new tax laws are introduced. For example, in 2012, in addition to paying ordinary income taxes, self-employed people must pay a 15.3% self-employment tax. It’s best to meet early with your qualified advisor and bookkeeper to so that you can avoid falling behind on planning.
2) You’ve Exercised Incentive Stock Options
People who exercise and sell their stock options often see their good fortune turn a little sour at the end of the year. Often, employers don’t withhold enough for taxes on the transaction, and this results in a surprisingly high tax bill. Also, stock options are often reported as ordinary income. That boosts the recipient into a higher tax bracket, a fact that results in a larger tax bill. That is never a nice surprise at tax time.
3) You Had or Will Have a Change in Marital Status
If you are recently divorced, your tax filing status and your tax deductions might be significantly changed. You might not be able claim the same number of children. If you’re used to writing off the interest you pay on the house you live in, understand that you might not be able to do that this year. There could be a substantial change in what you owe the IRS. Also, there are tax implications when you remarry. We often encourage couples to put the wedding off at least until January, so that they can minimize the tax impact.
4) You Withdrew Money from Your Retirement Plan
If you take money from your IRA or 401K, it’s critical that you withhold the appropriate federal and state income taxes on that withdrawal. If you’re younger than 59 ½, you will likely pay a 10% early withdrawal penalty on that money. I always caution my clients to avoid taking money out of their retirement plans. It is only a last resort.
5) You Get A Large Refund from the IRS
Getting a refund check from the government feels good. But it only means you’ve given Uncle Sam an interest free loan. If you update your W-4 and decrease your federal tax withholding, you can start collecting a larger pay check throughout the year. Save some of the money and put it to work for you in an investment account.
As with any tax situation, the better you plan the better off you will be. The key is leaving yourself time and your qualified advisor enough time to cover all your bases.
Click below to hear Win Damon and I talk about the end of the tax busy season, the buffet rule, Mitt Romney’s tax returns, what it all really means, and other fun news and financial topics of the day. Listen on WNBP 1450 AM in Newburyport and wnbp.com every Tuesday morning at 8:30!
The law requires us to pay taxes in a timely manner, either through our w2 or via estimated taxes. Did you recently start a business or become a consultant in the past year? If you did and expect to make more than a few thousand dollars, paying estimated taxes will help you avoid paying lots of tax (and possibly interest and penalties) come filing time. Paying estimated taxes also enables you to incorporate this expense into your budget. The IRS and Massachusetts Department of Revenue welcome estimated payments and even will send you estimated payment vouchers at the beginning of each new tax year to make sure you know where to mail the payments! The payments are due 4 times a year, in April, June, September, and January. It is very important to consult your qualified tax advisor when making these payments to insure that you are not overpaying or underpyaing by too much!
Stuart Steinberg, CPA, MBA has owned a strategic tax planning practice on the North Shore for 23 years. Please feel free to contact him anytime and let Erock Tax take care of you!
Tax Tip of the Day – Find out the right filing status for your particular situation
Married taxpayers who file jointly enjoy lower Federal tax rates on income even if only one spouse is working. Two married filing jointly taxpayers with no children that earn $125,000 pay $6,000 less in Federal taxes than a single person making $125,000! The key as it always is with tax filing is to know how the individual rule applies or know a qualified person who does! Some people do wait until the following year to get married or vice versa depending on the more favorable tax situation!
Stuart Steinberg, CPA, MBA has owned a strategic tax planning practice on the North Shore for 23 years. Please feel free to contact him anytime and let Erock Tax take care of you!
Tax Tip of the Day – Make Sure You Claim Your Child Tax Credit
According to 2008 statistics the average cost to raise a child is nearly $200,000. Couple that with the cost of college and you have a might fine sum that is needed to raise a child. The IRS offers taxpayers who have children several tax deductions and credits that mean more money in your pocket. Here is what the IRS offers:
The child tax credit is worth up to $1,000 per child through age 17.
Taxpayers with children are allowed an exemption which can potentially save from $370 to $1,295 per child on their tax return.
Taxpayers who have children under the age of 12 and send them to child care or camp qualify to receive a credit between $600 and $1,050 per child.
Please find out from your Tax Advisor what credits apply in your particular situation.
Stuart Steinberg, CPA, MBA has owned a strategic tax planning practice on the North Shore for 23 years. Please feel free to contact him anytime and let Erock Tax take care of you!
Some important figures to know when preparing your 2011 Taxes!
PAYROLL TAX CUT for employees extended through February 29, 2012. (Social security tax rate on wages up to $110,100 will be 4.2% rather than 6.2%.)
ADOPTION TAX CREDIT decreases to $12,650 for adoption of an eligible child.
SECTION 179 maximum deduction decreases to $139,000, with a phase-out threshold of $560,000.
STANDARD MILEAGE RATE for business driving remains at 55.5¢ a mile. Rate for medical and moving mileage decreases to 23¢ a mile. Rate for charitable driving remains at 14¢ a mile.
ESTATE TAX top rate remains at 35%, and the exemption amount increases to $5,120,000. The ANNUAL GIFT TAX EXCLUSION remains at $13,000.
401(k) maximum salary deferral increases to $17,000 ($22,500 for 50 and older).
SIMPLE maximum salary deferral remains at $11,500 ($14,000 for 50 and older).
IRA contribution limit remains at $5,000 ($6,000 for 50 and older).
KIDDIE TAX threshold remains at $1,900 and applies up to age 19 (up to age 24 for full-time students).’
NANNY TAX threshold increases to $1,800.
TRANSPORTATION FRINGE BENEFIT limit decreases to $125 for vehicle/transit passes and increases to $240 for qualified parking.
SOCIAL SECURITY taxable wage limit increases to $110,100. Retirees under full retirement age can earn up to $14,640 without losing benefits.
HSA CONTRIBUTION limit increases to $3,100 for individuals and to $6,250 for families. An additional $1,000 may be contributed by those 55 or older.
Pay your taxes on time. Don’t give the IRS any extra incentive to review your particular case. Paying and filing on time doesn’t ensure that you will not be audited but being on top of your taxes does show diligence and will not draw any unnecessary attention.
For more valuable tax and financial tips, visit our website at www.erocktax.com. Please contact us with your tax questions or come see us in person.
I can’t believe I am blogging about taxes! I thought I would never do it, but here I am writing about a subject that nobody likes!
You see the subject of taxes brings out the worst in many folks. And it doesn’t have to be that way. You know the saying: “Death and Taxes”. Well, it’s true. And the sooner we all realize this, the better off we will be. Taxes are not going away. There will be no pure flat tax. So we all have to deal with this very touchy subject every year. Instead of dreading tax season let me teach you how to embrace your tax filing.
A few quick tips:
As I said, embrace your tax filing.
Try to stay organized for your advisor.
Meet with your CPA early in the tax season even if you do not have all your documents.
Make sure you ask as many questions as you may have as there are no dumb questions.
The best time to plan is right now! It is early 2012, and we can adjust your withholdings to make sure you don’t get a large refund or owe too much when you file next year. .
Stuart Steinberg, CPA, MBA has owned a strategic tax planning practice on theNorth Shore for 23 years. Please feel free to contact him anytime and let Erock Tax take care of you!
Stu’s Letter to the editor – Newburyport Daily News
