Taxes: Start Your Money Plan Here

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Taxes Start Your Money Plan Here
Brought to you by 360 Degrees of Financial
Literacy and America's CPA Financial Planners

• Take Charge Your Money. Your Life.

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Lets get this out of the way

• The general information contained in this web
  seminar is provided by the American Institute of
  Certified Public Accountants as a service to the
  public and our members.  It is not intended to
  serve as tax, legal or any other professional
  advice applicable to any particular person or
  matter.

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Your Host

• Gina Chironis, CPA/PFS
• CEO, Clarity Wealth Management
• PFP Executive Committee Member
• AICPA member
• PFS credential holder
• CalCPA PFP Committee Chair

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The Stats

• A recent poll conducted for the AICPA and 360
  Degrees of Financial Literacy found
• 94 of Americans have financial concerns.
• 40 are concerned about basic living expenses
• 25 are concerned about the long-term
• Source Harris Interactive

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The Benefits of Planning Ahead
Feeling very confident in managing money,
savings and investments
Not feeling behind on any specific goal
Living comfortably

• Statistics for households with incomes of
  100,000 or more.
• 2012 Household Financial Planning Survey,
  Certified Financial Planner Board of Standards,
  Inc. and the Consumer Federation of America. July
  23, 2012.

Source BAM Advisor Services
02.09.12
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The Takeaway Americans Need a Plan

• Where are you now?
• Where do you want to be in the future?
• The Plan Your roadmap to get there!

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Where Are You Now

• Your tax return tells a story. In it you will
  find
• Details of your cash flows.
• Information important to your investment,
  retirement and estate planning strategies.
• Overlooked opportunities to help you achieve your
  financial goals.

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Your Tax Return Provides Valuable Info on Where
You Are Now

• Estimate of Total Annual Spending 1040
• IRA Contributions/Distributions 1040
• Marginal Tax Bracket 1040
• Big Ticket Expenses Schedule A
• Interest Dividend Income Schedule B
• Capital Gains (Losses) and Investment Trading
  Activity Schedule D

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How Much are you Saving and Spending?

• How much are you saving?
• Company retirement plans
• IRAs
• Personal savings

• Estimate your total current spending
• Gross Income1040 Line 22
• Savings
• Taxes1040 Line 61
• You Spent the Rest

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Tax Bracket

• Current Marginal Tax Bracket the tax rate that
  applies to the next dollar of income earned.
• Find your Total Taxable Income on Line 43 of 2013
  Form 1040.

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2014 Federal Tax Brackets
2014 Federal Taxable Income Brackets and Rates 2014 Federal Taxable Income Brackets and Rates 2014 Federal Taxable Income Brackets and Rates 2014 Federal Taxable Income Brackets and Rates
Rate Single Filers Married Joint Filers Head of Household Filers
10 0 to 9,075 0 to 18,150 0 to 12,950
15 9,076 to 36,900 18,151 to73,800 12,951 to 49,400
25 36,901 to 89,350 73,801 to 148,850 49,401 to 127,550
28 89,351 to 186,350 148,851 to 226,850 127,551 to 206,600
33 186,351 to 405,100 226,851 to 405,100 206,601 to 405,100
35 405,101 to 406,750 405,101 to 457,600 405,101 to 432,200
39.6 406,751 457,601 432,201
Source Internal Revenue Service
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Schedule A Expenses

• Medical expenses gt10 AGI
• Mortgage Interest Expense
• (no principal payments)
• Charitable contributions
• State Taxes
• Misc. Expenses gt2 AGI
• Phaseouts

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360-Degree View

• Your tax return gives you a 360-degree view of
  your finances that you can use to improve your
  future.

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Tax Planning The Bridge to Financial Planning

• Think about taxes year round.
• Save money tax efficiently for future needs.
• Spend money tax efficiently so you keep more to
  invest in your future.

Hint Visit www.360taxes.org for year-round tax
tips.
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Where do you want to be in Retirement?
What lifestyle do you want? How will your
expenses change? Are you planning for medical
expenses? Do you have an overall game plan?

• Taxes Start Your Money Plan Here

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360-Degree View
? Save money tax efficiently ? Identify future
deductions ? Spend money tax efficiently
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What's Your Tax Strategy?
How are you timing income and deductions? Have
you considered ways to bunch deductions? Are you
losing deductions due to phaseouts? Do you have a
system for tracking expenses?

• Taxes Start Your Money Plan Here

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Decrease Debt or Invest?
Pay down debt when you cant invest at a higher rate Pay down debt when you cant invest at a higher rate Pay down debt when you cant invest at a higher rate Pay down debt when you cant invest at a higher rate Pay down debt when you cant invest at a higher rate
401(k) Match Credit Card Investment Mortgage
Interest Paid / Received 100.0 18.0 8.0 6.5
Tax effect _at_ 25 -- 0.0 -2.0 -1.6
Net Paid / Received 100.0 18.0 6.0 4.9
Assumes 100 matching of first 3 of your pre-tax 401k contributions Assumes 100 matching of first 3 of your pre-tax 401k contributions Assumes 100 matching of first 3 of your pre-tax 401k contributions Assumes 100 matching of first 3 of your pre-tax 401k contributions Assumes 100 matching of first 3 of your pre-tax 401k contributions
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Planning Bonus

• Estate Planning Tip While reviewing retirement
  documents, check beneficiary information to
  ensure it is accurate and up to date.

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360-Degree View
? Maximize deferral opportunities ? Reduce
unnecessary complexity ? Maximize Social
Security benefits ? Ensure sustainable
withdrawals
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RetirementPlanning

• Key Document
• Form 1040
• Key Questions
• Do you have a plan for retirement?
• Divide your total spending by 3- 4
• Are you maximizing deferral opportunities?
• 401(k), 457, 403(b), IRA
• Do you have multiple retirement plans?
• Consider consolidating them.
• Have you considered a Roth conversion?
• Run the numbers on your plan

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RetirementDistributions

• Key Document
• Form 1040
• Key Questions
• Are you withdrawing at a sustainable rate?
• Dont run out of money before you run out of life
  expectancy.
• Are you taking required minimum distributions?
• Over 70 ½ you have to take a required minimum
  distribution.
• Are you drawing from the right place?
• Pull money from the right pool for tax
  efficiency.
• Are you maximizing Social Security benefits?
• Know rules for spouses, divorcees.

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360-Degree View
? Review asset allocation ? Match returns to
goals ? Manage risk ? Reduce unnecessary
complexity
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3.8 Tax on Net Investment Income

• Applies to individuals withmodified AGI above
  certain thresholds
• 250,000 for married couplesfiling jointly
• 200,000 for single taxpayers
• Includes capital gains, interestand dividend
  income frominvestment assets
• May also apply to rental androyalty income

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Increased Tax Rates on Dividend Income and
Capital Gains

• The dividend income and long-term capital gains
  tax rate jumped in 2013 from 15 to 20 for high
  earners (23.8 if the new net investment income
  tax applies).
• The dividend and long-term capital gains rates
  for other taxpayers remained the same,ranging
  from 0 to 15.

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Investments
Is your plan consistent with your goals? Does
asset allocation consider risk tolerance? Are
your investments tax efficient? Have you
considered the safety of your assets? Does your
asset allocation consider cash flow?

• Taxes Start Your Money Plan Here

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Investment Considerations

• Key Document
• Schedule BInterest Dividends
• Key Questions
• Are you properly diversified?
• Risk and return are married.
• Do you have enough cash?
• 3 months savings might not be enough.
• Do you have too much cash?
• Balance inflation with interest rates.
• Do you have too much cash in one bank?
• Watch FDIC limits.

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Investments

• Key Document
• Schedule DCapital Gains/Losses
• Key Questions
• Are investment decisions coordinated with tax
  planning?
• Lower capital gains rates Medicare tax
• Asset location where are you holding taxable vs
  tax free investments
• Are you harvesting losses?
• Offset capital gains by taking losses.
• Are you carrying losses forward?
• Reduce your future tax bill.

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360-Degree View
? Assess insurance needs ? Review estate plan ?
Create an emergency fund
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Future You
Have you set clear goals? Do you have protection
for your family and assets? Are you ready for
emergencies?

• Taxes Start Your Money Plan Here

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Future You

• Planning is only as good as your goals.
• Know where youre headed.
• Develop a clear picture for retirement.
• Evaluate the education needs of your children.
• Will you pay the entire cost of tuition?
• What percentage will you commit to?
• It is a continuous process, not a one time event
• Protection is as important as planning.
• Without proper insurance you could jeopardize all
  the saving and planning you have done.
• Estate planning is not just for the wealthy. Its
  for everybody.
• An emergency fund helps bridge difficult times.

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Future You

• Planning is only as good as your goals.
• Know where youre headed
• Establish a budget and savings goals
• Develop a clear picture for retirement
• It is a continuous process, not a one time event

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Questions and Resources

• QA
• www.findacpapfs.org
• www.aicpa.org/pfp/consumer
• www.360financialliteracy.org
• Among them
• Checklists to use with your own return.
• Todays PowerPoint presentation.
• Archived recording of todays webinar.
• Tips on choosing the right financial advisor.