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IRS Releases 2023 Key Numbers for Health Savings Accounts

The IRS has released the 2023 key tax numbers for health savings accounts (HSAs) and high-deductible health plans (HDHPs). The IRS has released the 2023 contribution limits for health savings accounts (HSAs), as well as the 2023 minimum deductible and maximum out-of-pocket amounts for high-deductible health plans (HDHPs). An HSA is a tax-advantaged account that’s … Read more

Watch Out for These Common Tax Scams

According to the Internal Revenue Service (IRS), tax scams tend to increase during tax season and/or times of crisis.1 Now that tax season is in full swing, the IRS is reminding taxpayers to use caution and avoid becoming the victim of a fraudulent tax scheme. Here are some of the most common tax scams to watch … Read more

There’s Still Time to Contribute to an IRA for 2021

Making a last-minute contribution to an IRA may help you reduce your 2021 tax bill. If you qualify, your traditional IRA contribution may be tax deductible. And if you had low to moderate income and meet eligibility requirements, you may also be able to claim the Saver’s Credit for 2021 based on your contributions to … Read more

5 Reasons to Consult a Financial Planner on New Tax Legislation

            5 Reasons to Consult a Financial Planner on New Tax Legislation The new tax legislation proposed will undoubtedly impact the tax responsibilities of those individuals and families who have multi-generational wealth.  While the highest impact will be seen generally for our ultra-high-net-worth and highest-earning clients, at Ballast Advisors we … Read more

What to Do If (When) Your Taxes Start Going Up

        One variable that is hard to plan for in retirement is taxes. There are steps you can take despite the uncertain tax landscape. Not knowing what Congress will do should not stop you from planning. What to Do If (When) Your Taxes Start Going Up Not knowing what Congress will do … Read more

Inflation is Not a Hidden Tax – It’s a Very Real Tax 

                  Do you understand how inflation will impact your overall financial plan? Consider how the concept of bracket creep can impact your tax burden and purchasing power. Inflation is Not a Hidden Tax – It’s a Very Real Tax Bracket Creep accounts for a real tax increase … Read more

“Have you enjoyed your money?” And other financial planning questions you should ask yourself in 2021

By Paul Parnell

Photo of Paul Parnell

“Have you enjoyed your money?” This is a question I often ask my clients. Too often I see investors who work and save diligently for a lifetime and yet never actually enjoy the fruits of their labor.  

After a year of life in a pandemic, I’m seeing a shift, and more families are taking time to reevaluate their priorities in terms of how they truly want to spend their time and money. Here are some common questions and points of consideration to reflect on for your personal financial plan.

Have you reevaluated any major priorities?

For example, I have clients say they plan to travel more once things open again. Some desire to move closer to family, to downsize, to retire earlier. Sadly, there have been many stark reminders this year that life is short, and our health is never guaranteed.  I see families that are more reflective on leaving a legacy and making significant changes to their trusts to protect their assets.

Any effective financial plan must take these elements into consideration.

Did the pandemic impact your job or career?

Early retirement, a career change, or job loss means impact to employee benefits that are tied to your long-term goals.

Specifically, Cobra was extended again – for at least another 6 months beyond May. This offers the unemployed more time to find new work and maintain their healthcare benefits – an important component of your financial plan. Accordingly, if you’ve lost your job, you may need to evaluate whether or not you can benefit from rolling your 401K over to an individual retirement account.

Volatility in the markets over the last year impacted executive compensation plans. It’s important to reevaluate your stock options, RSUs, or any additional incentives for consequences.

I am also seeing that, for people who have retained their jobs, many have accumulated more cash reserves than normal. If your cash reserve is beyond the recommended 3-6 months of expenses, you should consider shifting some to longer term investments.

Has your risk tolerance changed?

Risk tolerance often changes when you go through major life events. I’ve heard clients say, “Life too short and I want to retire early,” and they are willing to buckle down and live on less in retirement.

Meet with your financial planner and evaluate your current risk tolerance. Is it enough to maintain a high probability of your assets lasting? Cash and more conservative investments like CD’s aren’t paying much of anything these days. With interest rates so low, and plans for new economic expansion, historically this is a time to be more aggressive. Ensure that your portfolio is balanced to meet your future goals.

How might taxes impact your financial plan?

There are likely some big tax law changes coming over the next couple years. This is the time to be looking at tax shelters and maximizing your retirement plans, if you can. At Ballast Advisors, we also have an affiliated CPA practice, so this is a comprehensive service we may offer our clients.  We work with our client’s other advisors—including accountants, attorneys, and bankers—to ensure the seamless execution of your plan.

Capital Gains tax are likely to increase to historical levels, and this is something to be planning for earlier than perhaps you had planned. It’s something to be watching very carefully.

Questions and Answers

Any successful investment strategy requires getting to know our clients- to understand their dreams, goals and create a complete picture of their financial situation. 

Anytime you have major life change or shift priorities – be they personal or financial –your financial plan needs to reflect those changes. It is equally important to update your estate plan. It’s important to consult with your financial professionals to ensure that you are on track to meet your goals, no matter what life brings.

Whatever your passion is – from travel to grandkids – make sure you build in a plan to enjoy your money.

IMPORTANT DISCLOSURES The opinions expressed herein are those of Ballast Advisors, LLC and are subject to change without notice.  Past performance is not indicative of future results. Nothing contained herein is an offer to purchase or sell any product. This material is for informational purposes only and should not be considered investment advice. Ballast Advisors reserve the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

 The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice. Ballast Advisors, LLC is a registered investment advisor under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about the firm, including its services, strategies, and fees can be found in our ADV Part 2, which is available without charge upon request.

Tips for Documenting Your Charitable Gifts

Charitable donations allow you to give and take—you give money or property to a qualified charity and then take an income tax deduction. By supporting an organization or cause, you may be able to lower your tax bill. As you plan your giving, it is important to keep accurate records in the event that you have to substantiate such gifts. Receipts for your charitable donations can confirm your contributions should the Internal Revenue Service (IRS) require proof of documentation.

If you make a charitable donation of cash or property, you need to obtain a bank record or written acknowledgment from the recipient charity that specifies the amount and date of the contribution, as well as the name of the charity. For IRS purposes, a canceled check for a donation of cash no longer suffices as a receipt. For property, the acknowledgment must describe the gift and provide an estimated valuation. Donations of clothing and household items must be in “good condition” in order to qualify for a tax deduction. Remember, non-cash contributions exceeding $5,000 require a qualified, written appraisal within 60 days of the date of the gift, and you must submit the appraisal when filing your taxes.

(See related post: Year-End Charitable Giving)

Honoring contributors with a gift of appreciation is a common practice, especially with online and television fundraising. If any considerations (e.g., meals, clothing, concert tickets, trips, or books) were given in exchange for a contribution, the donation statement from the recipient charity must specify the value of the consideration. Your tax deduction is reduced based on that amount.

While receipts and other acknowledgments are not filed with your annual Federal income tax return (Form 1040), be sure to carefully store this material along with other tax documents for the year in which the donations were made. As a general rule, keep tax records, including all tax forms, investment statements, bank statements, proof of deductions, or any receipts associated with a particular return, for at least six years. Preparation and organization can help ensure that you have the records you need, when you need them.

Copyright © 2015 Liberty Publishing, Inc. All rights reserved Distributed by Financial Media Exchange

IMPORTANT DISCLOSURES The opinions expressed herein are those of Ballast Advisors, LLC and are subject to change without notice. The third-party material presented is derived from sources Ballast Advisors consider to be reliable, but the accuracy and completeness cannot be guaranteed. Past performance is not indicative of future results. Nothing contained herein is an offer to purchase or sell any product. This material is for informational purposes only and should not be considered investment advice. Ballast Advisors reserve the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

Ballast Advisors, LLC is a registered investment advisor under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about the firm, including its services, strategies, and fees can be found in our ADV Part 2, which is available without charge upon request.

Temporary Payroll Tax Deferral: What You Need to Know

 

Potential tax deferral under CARES Act:

• Withholding of employer share of Social Security tax not required from March 27, 2020, to December 31, 2020

• Makeup of withholding required by December 31 of 2021 and 2022

Potential tax deferral under recent guidance:

• Certain withholding of employee share of Social Security tax not required during September to December 2020

• Makeup of withholding required during January to April 2021

On August 8, 2020, the president issued an executive order to allow the deferral of certain payroll taxes during the last four months of 2020, and the IRS recently provided related guidance. This has implications for both employers and employees. Here’s a brief summary of the issues.

Already-existing payroll tax deferral provisions

There are generally two separate contributions to the Social Security payroll tax (technically, the Old-Age, Survivors, and Disability Insurance, or OASDI, tax) — a 6.2% employer portion and a 6.2% employee portion.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law in March 2020, already allowed eligible employers (and self-employed individuals) to defer the payment of the employer’s 6.2% share of Social Security tax from March 27, 2020, to December 31, 2020. Any deferral of the employer Social Security payroll tax under the CARES Act must be repaid over a two-year period, with half of the deferred tax due by December 31, 2021, and the other half due by December 31, 2022. Similar deferral is available under the railroad retirement tax.

Employee portion of Social Security tax now eligible for deferral

The recent executive order and related IRS guidance expand the payroll tax deferral opportunity — generally allowing employers to defer withholding and payment of the employee’s 6.2% share of the Social Security tax for payroll dates that fall on or between September 1, 2020, and December 31, 2020.

While employers are eligible to defer the employee portion of the Social Security payroll tax, the IRS guidance does not address whether self-employed individuals are also able to do so. Additionally, the employee portion of the Social Security tax cannot be deferred for any employee with wages or compensation of $4,000 or more in a biweekly pay period (or the equivalent amount with respect to weekly, monthly, or other pay periods). This dollar threshold applies per pay period, so it’s possible for an employee to qualify for deferral in some pay periods but not in others

It’s important to note that nothing in the IRS guidance indicates that the payroll deferral opportunities described here are mandatory. Employers can take advantage of the deferral provisions if they find them beneficial, but can continue to withhold and pay payroll taxes as normal if they wish.

An employer may ask employees whether or not they wish to defer their 6.2% portion of the Social Security payroll tax, but the guidance released does not specifically require it.

When do deferred amounts have to be paid?

If an employer defers the employee portion of the Social Security payroll tax during September, October, November, and December 2020, employees may receive larger paychecks, but this deferred payroll tax must be repaid in 2021 (absent new legislation that specifically forgives deferred amounts). Specifically, employers will have to withhold extra money from employee paychecks during the first four months of 2021 — January through April — to make up for the four-month deferral. This is in addition to the payroll tax employees must normally pay during 2021. As a result, employees who benefit from deferral of payroll tax between now and year-end are likely to experience reduced paychecks during the first part of 2021. An employee in this situation may wish to consider putting any extra funds from a larger paycheck in 2020 into a savings account to compensate for a smaller paycheck in 2021.

While it’s expected that many employers will opt not to defer payroll taxes, the Defense Finance and Accounting Service has announced that the Social Security payroll tax deferral will start automatically in mid-September for military members and civilian employees; they are not eligible to opt out.

Many questions remain, and additional guidance is expected.

IMPORTANT DISCLOSURES The opinions expressed herein are those of Ballast Advisors, LLC and are subject to change without notice. The third-party material presented is derived from sources Ballast Advisors consider to be reliable, but the accuracy and completeness cannot be guaranteed. Past performance is not indicative of future results. Nothing contained herein is an offer to purchase or sell any product. This material is for informational purposes only and should not be considered investment advice. Ballast Advisors reserve the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice. Ballast Advisors, LLC is a registered investment advisor under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about the firm, including its services, strategies, and fees can be found in our ADV Part 2, which is available without charge upon request.

IRS Outlines Changes to Health-Care Spending Rules Under CARES Act

Coronavirus Aid, Relief, And Economic Security Act: Letter Tiles CARES Act On US Flag, 3d illustration

The IRS provided COVID-19 guidance for health Flexible Spending Arrangements and section 125 cafeteria plans related to high-deductible health plans through Notice 2020-29.

The amended rules under the Coronavirus Aid, Relief, and Economic Security (CARES) Act provide flexibility for health-care spending related to the ongoing COVID-19 pandemic.1

High-deductible health plans cover telehealth services

Under the CARES Act, a high-deductible health plan (HDHP) can temporarily cover telehealth and other remote care services without a deductible, or with a deductible below the minimum annual deductible otherwise required by law.

Telehealth and other remote care services also are temporarily included as categories of coverage that are disregarded for the purpose of determining whether an individual who has other health plan coverage in addition to an HDHP is eligible individual to make tax-favored contributions to his or her health savings account (HSA). Thus, an otherwise eligible individual with HDHP coverage may still contribute to an HSA despite receiving coverage for telehealth and other remote care services before satisfying the HDHP deductible, or despite receiving coverage for these services outside the HDHP. These changes are effective for services provided on or after January 1, 2020 through December 31, 2021.

Additions to qualified medical expenses

The CARES Act also modifies the rules for “qualified medical expenses” that are reimbursable from tax-advantaged health savings accounts (HSAs), Archer Medical Spending Accounts (MSAs), health flexible spending accounts (FSAs), and Health Reimbursement Arrangements (HRAs). Specifically, the cost of menstrual care products is now reimbursable. These products are defined as tampons, pads, liners, cups, sponges and/or other similar products. In addition, over-the-counter products and medications are now reimbursable without a prescription. The new rules apply to amounts paid after Dec. 31, 2019. Taxpayers should save receipts of these purchases for their records and so that they are able to submit claims for reimbursement.

1) IR-2020-122, June 17, 2020

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2020

IMPORTANT DISCLOSURES The opinions expressed herein are those of Ballast Advisors, LLC and are subject to change without notice. The third-party material presented is derived from sources Ballast Advisors consider to be reliable, but the accuracy and completeness cannot be guaranteed. Past performance is not indicative of future results. Nothing contained herein is an offer to purchase or sell any product. This material is for informational purposes only and should not be considered investment advice. Ballast Advisors reserve the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice. Ballast Advisors, LLC is a registered investment advisor under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about the firm, including its services, strategies, and fees can be found in our ADV Part 2, which is available without charge upon request.