Financial Focus: Tax Season 2021 — March Madness, it’s time for The Professors Income Tax Bowl Game Plan!
By Professor Anthony Rivieccio MBA PFA
March! If your into sports, it’s national college basketball playoff ( NCAA) season. It’s also ( finally) time for Baseball Spring Training and for most Americans, it’s Income Tax Bowl time— a race to the 1st place finish line to see who can pay the least taxes ( or get the biggest tax refund) first?
So what’s the game plan!? 😳
Firstly, there are over 350 Tax Deductible areas in ones life that generally fit into our personal & professional lifestyle. Some are universal, many are life style based. Those bring you the big bang for the dollar.
Secondly, you may or may not know this , but our US Government have been ” tweaking” the tax laws , which effect everyone, especially in the areas of self employment & retirement
So , what’s the game plan!? 😳
Well, as the ” coach” I’ll give you some ” overviews”. Please discuss these with your preparer or advisor for how many of these tips can effect you.
So, as with Baseball, let’s start warming up:
- 1099s – accurate or not?
These forms are for : Retirement, Bank interest, Investment dividends, Capital gains. REVIEW THEM FIRST!. In my 30 years, I’ve seen it more than once. An administrative ” wrong code” could cost you thousands of dollars in taxes.
Real Example. I had one situation that the code was put in wrong by their Administration department- a retirement distribution of $250,000 , which should have been in a tax free code, cost $10,000 to one. I guess this where my Clients call me Superman I guess , as digging in deep with the IRS, their Administration Department, our office , and 2 years of aspirin 😳 we solved the problem.
*New RMD tables
We’re living older folks!. And in the first time in 20 years the IRS has changed its life expectancy tables. We take our Retirement Minimum Distribution ( RMD) based on those tables. REVIEW THEM!. Because of the new ” Secure Act” , lifetime expectancy is now caculated at age 72, not 70. In dollars, what does that mean?
Answer: You might have to change your distribution by 3% to not be in the tax danger zone.
*Charity & Gifting
Are your charitable contributions still tax deductible if your using the standard deduction? If it’s over $300? NO!. But there are two ways around this
- You can consider turning a portion of your RMD to a QCD- a Qualified charitable distribution. That way you get the full deductible value.
- Learn about DONATED property. Donating any non money item, from clothing to furniture to a care to an airplane, will get you maximum tax savings.
True example: I suggested to a Client to ” give” his used car to charity instead of trying to sell it on the street. One day, 10 months later, he called me from the church’s office: “Anthony, what do I need from there office again”? I mentioned this to him firsthand when he first told me about the frustrations of trying to sell his car. The priest and I were laughing as he knew exactly what to give him– a receipt from the church with letterhead. That $10,000 used car , which he tried to sell, for as low as $4,000 with all the frustration of not being able to do so, gave the keys to the priest and got ( under rules ) a $7,000 deduction.
- Child Tax Credit
A mess!. No it never was free money, it was advance payments off your refund. But it gets worse.
The IRS has announced the Information on their Letter 6419 to people who received the payments may be inaccurate 😳😳.
Answer: Besides saying a quick prayer? Inhale, exhale, check your banking statements
- Itemized Deductions
Medical Expenses, State & City taxes you pay, Home Mortgage, Charity. These are the universial deductiblities for everyone. With the change in the 2017 Tax Changes, many now suggest to take the universial standard deduction over itemizing your deductions. The standard deduction is based on filing status, so for example, any single person could take a no questions asked $15,000 standard deduction — or itemize– and of course use the bigger number.
Our Answer: Wait s minute. Live in a high tax State? Then it’s a whole new ballgame. For example, a Single New Yorker, making $60,000 a year would pay $12,000 in State and City taxes. Now , remember, look above, this number IS one of those caculations. In simple terms that means if you had $3,001 more deductions ( in general terms)in : Medical, Mortgage & Charity- then it’s worth to itemize!.
- Ad Hoc Landlord
That’s what I call many people today when they rent out a portion of their property for ” rental income” related purposes. Well, if they had rental income then they had Rental Expenses. And in IRS land there are over 20 tax credit related areas that are credit-able. We say ” credit ” over ” deduction” because a deduction is a tax bracket equivalent savings, a credit is a Dollar for Dollar savings.
An example: So, one of my Clients,has for years rented a room in her home, received $15,000 a year in rental income and by offsetting her expenses her NET income could be as low as $1,000. Based on her bracket , she will owe $400. How much does she save? She knows if that $15,000 was recorded as ” earned” income not ” rental” her tax liability would have been $6,000. Her savings $5,600. Almost a 50% tax savings return.
Answer : Get a tenant and a good tax representative 😳!. If you have a tenant talk to your preparer of get a tax advisor.
- Have a Small or Home Based Business
Another Tax ” Credit” area. Sell cookies? Key Rings? Coffee? Mary Kay? Books? Don’t laugh, I have many Clients that due. The ” Business Income” can be ; from seasonal to full time. As with rental expenses, there are also over 25 areas of ” business expenses” from the : rent, supplies, equipment, and many many other areas. The same ” Net ” taxable income areas of apply. Example : Sales of $10,000 but expenses at $9,000 beings your NET at $1,000 , a potential tax liability of up to $400 vs the $10,000 being recorded as ” earned income” and now that liability could be $4,000 or a tax savings of $3,600.
Answer: Buy 1 hour of a Tax Advisors time to drill down and learn all of your business deductiblities
- Withholding Readjustment
This might be for many the biggest tax planning secret Federal & State withholding are the taxes you pay, out of your paycheck based on withholding forms that you filled out. You can always readjust them. Wanna pay more or less in taxes during the year? Just readjust your withholding
Answer: But the real solution is to adjust it to what we called your ” correct tax allowance”. What is that? In simple terms, it’s your Gross Income minus your tax deductions and credits . That is your adjusted gross income or what I call ” paying your fair share in taxes” where , all other things remaining equal, you do not owe nor will you get a refund, you are at $0. Then, if you increase your withholding after this , for example , you will get every dollar you adjust, back. Where can you get that number? Speak to your tax Preparer.
Recent Tax and Retirement legislation means people need to be more careful this– and in future tax seasons. There are many areas that you should speak to a tax professional with. And not just with concerns, but as you can see above , tax opportunities.
Of course there are many other tax laws that should be looked at , based on one financial and tax lifestyle. That’s the 2nd half of the College Basketball game. Many are rushing now to their tax person, probably not fully prepared and there tax return will not be fully maximized for tax savings. They might make it to the championship game, but can they really win it all?
Using those items above will get through 90% of the playoff! To get to the championship game and win the game– get a tax planner – and learn how to ” mold the tax laws ” into your lifestyle”. Towards the end of the game– this game being April 18th ( not 15th) you will shoot 3 point shots like Kevin Durant by banging points with a bigger and bigger tax return, year after year after year 🧶🧶
Want to win The Income Tax Bowl game, celebrate with the NCAA winners in Disneyland & enjoy several baseball games, live , in the Summer time? Start tax preparing & planning, now!.
Professor Anthony Rivieccio, MBA PFA, is the founder of The Financial Advisors Group, celebrating its 25th year as a full service investment planning & management firm . Anthony is also owner of Rivieccio Financial Advisors, a virtual only financial planning & advisory firm, opened in 2021.
Mr. Rivieccio, a recognized financial expert since 1986, has been featured by many national and local media including: Kiplinger’s Personal Finance, The New York Post, News 12 The Bronx, Bloomberg News Radio, BronxNet Television, the Norwood News, The West Side Manhattan Gazette, Labor Press Magazine, Financial Planning Magazine, WINS 1010 Radio, The Co-Op City News, The New York Parrot, The Bronx News, thisisthebronX.info , The Bronx Chronicle & The Parkchester Times. Mr. Rivieccio pens a financial article called “Money Talk” along with
” Financial Focus”.
Anthony is also currently an Adjunct Professor of Business, Finance & Accounting for both, City University of New York & Monroe College, a Private University.
Financial Focus University TV can be seen every Friday , Live 5PM, on The NY Parrot Facebook & YouTube page channels .
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