As we approach the holiday season, it’s easy to let financial planning slide to the bottom of your to-do list. However, November is actually the ideal time to assess your finances and take steps that can positively impact your tax situation for the year ahead. By planning early, you can enjoy a stress-free holiday season while setting yourself up for a smooth tax filing process next year. Here are some essential tips to prepare your finances before the year ends.
1. Review Your Income and Expenses
Take a close look at your income and expenses to get a clear picture of where you stand financially. Reviewing these figures now will help you identify any necessary adjustments before the close of the year. For instance, if your income has increased significantly, you may want to consider strategies for reducing your taxable income to avoid a higher tax bill. Or, if you’re a business owner, evaluating your expenses could reveal opportunities to make year-end purchases that can be deducted in this tax year.
2. Maximize Your Tax-Advantaged Contributions
If you haven’t yet maxed out contributions to retirement accounts such as a 401(k) or IRA, now is the time to do so. Contributions to tax-advantaged accounts reduce your taxable income, offering potential savings come tax season. For 2024, you can contribute up to $22,500 to a 401(k) or $6,500 to an IRA (with an additional $1,000 catch-up contribution if you’re over 50).
Don’t forget other tax-advantaged accounts like a Health Savings Account (HSA) if you’re eligible. HSAs not only reduce taxable income but can also serve as a long-term savings vehicle for medical expenses, with unused funds carrying over year-to-year.
3. Make Charitable Contributions
The holiday season is a wonderful time to give back, and it can also reduce your tax liability. Charitable donations made before December 31 can be deducted if you itemize on your tax return. Be sure to keep documentation of all donations, as the IRS may require proof. Non-cash contributions, such as donated clothing or household items, can also qualify, but make sure to keep a detailed list and consider obtaining an appraisal for high-value items.
4. Consider Timing Business Expenses
If you’re a small business owner or self-employed, consider timing certain expenses to optimize your tax deductions. Making necessary purchases, such as new equipment or supplies, before year-end can reduce your taxable income. Additionally, prepaying some expenses (such as rent or insurance) could allow you to maximize deductions for this year, especially if you use the cash basis accounting method.
5. Assess Capital Gains and Losses
If you have investments, now is the time to review your portfolio and evaluate any unrealized capital gains or losses. By strategically selling investments, you can offset capital gains with losses, a strategy known as “tax-loss harvesting.” This can help reduce your tax liability, especially if you’ve had a successful investment year. Just be mindful of the “wash sale rule,” which disallows a deduction for a loss if you repurchase the same investment within 30 days.
6. Use Any Remaining FSA Funds
If you have a Flexible Spending Account (FSA) for healthcare expenses, remember that many FSAs have a “use it or lose it” policy, meaning unused funds do not roll over into the next year. Check your plan’s specifics to see if there’s a grace period or carryover option, but if not, plan to use up any remaining funds by scheduling medical appointments, filling prescriptions, or purchasing eligible items like eyeglasses or medical supplies.
7. Plan for Estimated Tax Payments
If you’re self-employed or have other income sources that aren’t subject to withholding, make sure you’re on track with your quarterly estimated tax payments. The fourth-quarter payment is due in January, but planning now will help ensure you avoid a big surprise tax bill — and any associated penalties — when you file your return. Calculating your total income, deductions, and expenses now will give you a good estimate of what you owe.
8. Organize Your Tax Documents
Tax season can be a lot less stressful when you have everything in order. Take a few minutes to organize your receipts, statements, and other financial records, which will make filing much easier and more efficient. Consider using digital tools or apps to securely store these documents and avoid misplacing anything important during the busy holiday season.
Take a Proactive Approach
Taking a proactive approach to tax planning before year-end is one of the best ways to minimize tax liability and maximize financial opportunities. A little planning now will help you avoid the holiday rush and enjoy peace of mind going into the new year. At Loeffler Financial Group, we’re here to support your year-end financial planning needs. Contact us today to learn more about how we can help you make the most of this tax season.
Happy Holidays — and happy planning!
At Loeffler Financial Group, we often see businesses making some common bookkeeping mistakes that can have serious long-term consequences. The good news? They’re all fixable! Here are the top errors and how you can turn them around:
1. Not Keeping Personal and Business Expenses Separate
The Mistake: Mixing personal and business expenses is one of the most common errors. It can make your records messy, leading to confusion at tax time and making it harder to track business performance.
How to Fix It:
- Open a separate business bank account and credit card.
- Use software or apps to track expenses and make sure they are categorized correctly.
- Regularly review your statements to ensure expenses are clearly defined.
2. Neglecting to Reconcile Bank Accounts
The Mistake: Failing to reconcile your bank accounts regularly can lead to discrepancies between your books and actual bank balances. This makes it harder to spot fraud, errors, or overlooked transactions.
How to Fix It:
- Reconcile your bank accounts at least monthly. Compare your statements with your records to ensure every transaction is accounted for.
- Use accounting software that allows you to automate this process, making reconciliation faster and more accurate.
3. Forgetting to Track Receipts
The Mistake: Misplacing receipts or forgetting to track small purchases is a common issue. This not only affects tax deductions but can also lead to a messy audit trail.
How to Fix It:
- Use digital receipt tracking apps or accounting software with receipt capture capabilities.
- Make it a habit to scan and store receipts as soon as you make a purchase.
- Label and categorize receipts in real-time to save yourself headaches later on.
4. Misclassifying Expenses
The Mistake: Incorrectly classifying expenses is easy to do, but it can distort your financial reports and affect your taxes. For example, mixing operating expenses with capital expenses can lead to incorrect deductions.
How to Fix It:
- Familiarize yourself with common expense categories or work with a professional bookkeeper to set up a consistent system.
- Use accounting software with predefined categories to minimize errors.
- Review your expense categories regularly to ensure transactions are properly classified.
5. Delaying Bookkeeping Until Tax Time
The Mistake: Waiting until the end of the year or tax season to update your books can create a stressful and overwhelming situation. It also increases the chance of missing important deductions or details.
How to Fix It:
- Set a regular schedule (weekly or monthly) to review and update your books.
- Consider hiring a professional bookkeeper or using automated software to keep your financials updated in real-time.
- Review your books regularly to identify any issues early on.
6. Failing to Track Accounts Payable and Receivable
The Mistake: If you’re not keeping track of what you owe (accounts payable) and what you’re owed (accounts receivable), you could be missing payments or neglecting to chase down outstanding invoices.
How to Fix It:
- Set up a clear system to track both payables and receivables.
- Use accounting software that alerts you to overdue payments and outstanding invoices.
- Schedule regular reviews of accounts payable and receivable reports to stay on top of your cash flow.
7. Ignoring Payroll Tax Responsibilities
The Mistake: Failing to calculate and pay payroll taxes correctly can lead to penalties and compliance issues. This is especially common for small business owners managing payroll manually.
How to Fix It:
- Use payroll software or a third-party payroll service to automate the process.
- Stay updated on tax laws and deadlines to ensure you remain compliant.
- If payroll becomes too complex, consider outsourcing it to a professional service like Loeffler Financial Group.
8. Not Using Financial Reports for Decision-Making
The Mistake: Many businesses fail to use the wealth of information in financial reports, such as income statements and balance sheets, to make informed business decisions.
How to Fix It:
- Run financial reports monthly to monitor your business’s health.
- Review key metrics like profit margins, cash flow, and expense trends to identify areas for improvement.
- Work with a financial advisor to interpret the data and implement strategies for growth.
The Solution? Proactive Bookkeeping!
By recognizing and correcting these mistakes, you’re not only avoiding future headaches but also setting your business up for success. If you’re feeling overwhelmed or unsure about fixing these issues on your own, we’re here to help. At Loeffler Financial Group, we specialize in cleaning up books and setting up efficient systems to keep you organized and compliant year-round.
Ready to fix your bookkeeping? Contact Loeffler Financial Group today at 717-393-7366, and let’s get your books back on track!
Are you guilty of pushing your bookkeeping to the back burner with excuses like “I’ll do it next year,” “I know my money,” or “I don’t have time”? It’s time to recognize that these delays could be costing you more than you realize.
📊 Why Accurate Bookkeeping Matters
The truth is, that accurate bookkeeping forms the bedrock of your business’s financial health. Without it, you risk:
- Missed Tax Savings: Proper records ensure you claim all deductions and credits you’re entitled to.
- Inaccurate Cash Flow: Clear financial records help you understand your cash position and make informed decisions.
- Potential Penalties: Incorrect filings can lead to penalties and unnecessary headaches.
But it’s not just about your business; it impacts your family’s financial future too. Imagine the peace of mind knowing that your current needs and future goals are supported by a solid financial foundation.
⏰ Take Action Now
Don’t procrastinate any longer. Taking control of your books means setting up your business—and your loved ones—for:
- Growth: Clear financial insights pave the way for strategic decisions and sustainable growth.
- Better Decisions: Access to accurate data empowers you to make informed choices.
- Financial Clarity: Know where your business stands and plan confidently for the future.
Next year’s success starts with the right steps today. Let’s get your bookkeeping in order. Contact Loeffler Financial Group now to take the first crucial step towards financial stability and prosperity.
Remember, your business deserves the best financial footing possible. Let’s make it happen together.
New Year! New Goals! But guess what else January brings…That’s right—the unofficial start of tax season, and here at Loeffler Financial Group, we’re gearing up to make it as painless as possible for you! We even made some great improvements to our building to better serve you, and our clients!
We understand tax prep isn’t exactly the most exciting part of the year (trust us, we know!). But fear not, because we’re all in this together, and we’re here to offer you a quick reminder.
It’s time to start gathering those tax documents. Round up your W-2s, 1099s, receipts, and any other relevant paperwork. And if you don’t have everything just yet, no need to stress. You still have almost two months until the deadline comes knocking. But remember, the sooner you start, the smoother the process will be!
Here at Loeffler Financial Group, we’re genuinely thrilled because we’re all set to be your tax season partners! Whether you’re a tax prep pro or a rookie, rest assured, we’ve got your back and can guide you every step of the way.
We’re more than just an accounting firm; we’re family. This year, let’s breeze through tax season together, making the journey as easy and stress-free as possible. Stay tuned for helpful tips, important updates, and gentle reminders along the way.
Let’s tackle tax season head-on, together! Call 717-393-7366, or book right online for an easy and stress-free Tax appointment.
A MUST READ if using digital payment tools or reselling tickets
A recent tax law change by this edition of Congress now requires transaction reporting to the IRS for anyone receiving more than $600 in payments through digital payment tools like PayPal, Venmo, and CashApp. It also impacts anyone using transaction platforms to buy or sell tickets for sporting events and concerts. Here is what you need to know.
What is happening now
They need your Social Security number. If you use digital payment platforms you will now need to provide your Social Security number and a valid name and address to accept digital payments or to buy and sell tickets online.
The IRS will know. Most of these transactions for those receiving funds will now have this activity reported to the IRS if the total for the year exceeds $600. This is true even if you lose money on the transaction. It will be done using Form 1099-K and will be issued to you in January.
Your taxes may be more complicated. If the IRS considers the transaction a business transaction, you will now need to report the transaction on your 2022 tax return, even for casual transactions that lose money. This is often the case when selling event tickets for a loss or taking digital payments at a garage sale.
You may receive many 1099-Ks. You can expect to receive a separate 1099-K from every platform you use where you exceed the $600 threshold.
The IRS watchdog approach. Prior to 2022, the reporting threshold was $20,000 AND more than 200 transactions. But with the perceived under-reporting of income by those in the gig economy, the transaction threshold was eliminated and the dollar threshold was lowered to $600. Now the IRS will use their computer auditing to compare your 1099-Ks with what you report on your tax return and audit you if they do not match.
What to do now
Coach your friends. Whenever you exchange money with friends in a digital format like Venmo, have them mark the transaction as non-business. Each application will handle this differently, but it is critical you do this to avoid getting a 1099-K in error.
Use cash or check. When receiving payments from friends, if there is potential for error ask for a check or cash. This will avoid the 1099-K reporting mess.
Split payments. When splitting a bill at a restaurant, do not have one person pay and then get reimbursement. Instead, ask the restaurant to split the bill and everyone pay their share. You can make this easy on your server if you are willing to split the bill evenly.
Understand the problem. When receiving a digital payment, you are relying on the person paying you to code the transaction correctly. Unfortunately, you cannot make them do it correctly, so you now need to keep track of digital money received, who it was from, and for what purpose.
True business transactions. For those of you in the gig economy, you have a different problem. Many reporting platforms are inconsistent on reporting. Some will report your income twice, once on a 1099-K and again on another tax form (1099-MISC or 1099-NEC). You must actively monitor this information. Plus, you need to know whether the amount reported is gross proceeds (required) or whether they netted out their fees.
Casual users of seller platforms are now in business. Infrequent users of places like E-Bay, Etsy and Amazon are now in business when payments received are more than $600. Be prepared to create a business tax return on Schedule C of your Form 1040.
This seemingly simple change in the tax code is having a wide-reaching impact. It will further complicate filing taxes AND processing taxes for the IRS. Given the level of public outcry, a roll back of this new rule is possible, but given the nature of Congress, do not plan on it.
With tax season in the rear view mirror, now is the time to take a hard look at your federal and/or state withholdings to ensure next year’s tax bill does not surprise you.
A review is more important than ever!
There are a number of tax code changes that will impact the amount of tax you pay next year. So much so, that if you do not forecast your tax obligation now, you may be in for a very unpleasant surprise. This is true because:
No more advance payments for the Child Tax Credit. The one-year requirement of the IRS to pay out half of the Child Tax Credit in advance is no longer in place. So you will not only need to plan for this change, but it will also impact your tax return.
Child Tax Credits are lower. In addition, the Child Tax Credit amount for each child is rolling back to the 2020 dollar amount of $2,000. This could mean as much as $1,600 in lower credits for each of your children.
Dependent care credits are lower. The dependent care credit is also lower in 2022. So if both you and your spouse work and have daycare expenses, you will need to forecast the impact of this on this year’s tax obligation.
New 1099-K reporting may require estimated tax payments. The IRS will be receiving millions of new informational tax forms reporting activity from those using digital payment platforms. So for those reselling event tickets, using sites like eBay, Esty and Amazon, you will now need to account for all this income. It may now require quarterly estimated tax payments throughout the year.
Be aware of life events. In addition, a change in your situation could create the need to review your withholdings. It could be due to a job change, selling or buying a home, getting married or divorced, or having a birth or death in the family. Whatever the cause, be aware of the potential change and put a sharp pencil to revising your withholdings.
High inflation is impacting everything. Finally, consider the impact of inflation on your situation. This is especially important if you have a small business as higher costs of labor and supplies could dramatically impact your pending tax bill.
Calculating and making adjustments
Using the IRS calculator. The IRS has an online tool to help you calculate how much you will need to withhold. In order to get an accurate reading, you need to have a copy of your latest paycheck or last quarterly estimated tax filing (Form 1040 ES) and a copy of your last tax return.
The IRS tool is here: IRS Withholding Calculator
Simply follow the tool’s instructions and compare the tool’s recommendation to your current withholdings.
Get expert help if necessary. The IRS recently changed the way it calculates recommended withholdings. While the intent is well intended, many are confused by the change. It is always a good idea to call to review your situation if you have any doubts. But do it now, while there is plenty of time in the year to build the proper withholding amount.
File a new withholding form with your employer. Whether you’re paying too much or too little, you can fix it by filling out a new W-4 form and giving it to your employer. If you’re filing quarterly estimated taxes, you can adjust your next quarter’s estimate in a similar way.
In a perfect tax world, you would not owe too much nor get too large of a refund. Think of overpayments as an interest-free loan the government borrowed from you. Conversely, a shortfall means writing a large check when you file your tax return. That’s a surprise few of us want.
Call Loeffler Financial Group today to schedule a quick review at 717-393-7366.
Summer brings warm weather, fun outdoor activities, and new opportunities to earn some additional income. However, taxes on seasonal income need to be handled with care, whether they’re related to your child’s first job or an extra income opportunity for you.
Here are some tips to help you manage the taxes on your summer earnings:
Students should take advantage of tax-free earnings limits. If you anticipate making less than the annual standard deduction ($12,950 for single taxpayers in 2022), none of your earnings are subject to federal taxes! If possible, earn at least that amount each year to maximize your tax-free earnings. Remember, if you can be claimed as a dependent on someone else’s tax return, the limits for tax-free unearned income such as interest and dividends are lower.
Tip: If your annual earnings will be less than the standard deduction, you can claim EXEMPT on your Form W-4. That prevents federal income taxes from being withheld from your paycheck.
Independent contractors need to make estimated payments. As an independent contractor, you are responsible for paying all the taxes on your earnings. To do this, you make quarterly estimated tax payments to the IRS using Form 1040-ES. In addition to federal and state taxes, independent contractors need to pay a self-employment tax of 15.3% of earnings.
Tip: Track your expenses and save receipts. By doing this, you can subtract eligible expenses like mileage, supplies and uniforms from your gross earnings. Use this lower-income number to calculate your self-employment tax and correctly estimate your income tax obligation.
Closely monitor tax withholdings. As an employee, your employer withholds taxes based on what you claim on Form W-4. Unfortunately, the tax tables used by this form to calculate your withholdings do not account for seasonal jobs. This typically results in paycheck withholdings being too low for supplemental income workers and too high for students working during the summer.
Tip: If you anticipate earnings in excess of the standard deduction, request a revision of your withholdings. Use tools on the IRS website, review last year’s tax return, or ask one of the tax experts at Loeffler Financial Group for help to estimate the correct amount to withhold. From there, ask your employer to adjust your federal and/or state withholdings up or down.
With a little tax planning, you can ensure that your summer job provides the income you are looking for without the disappointment of unexpected taxes. Please call if you have any questions.
Here are five common retirement planning ideas and what you can do to take advantage of them. The key is retirement planning starts now, not decades from now when you are reaching retirement age.
1. Having a plan
Surprisingly, most do not know how much money is needed for retirement. This is being made much more difficult with inflation playing a major role in finding the right answer. A retirement plan should consider how long you expect to live, an estimate of the amount of money you will need, and a description of your desired lifestyle during retirement. Your plan should have measurable goals that you aim to achieve.
Action item: If you have a plan, review it for possible revisions. If you do not, consider getting one put together as soon as possible.
2. Start early enough
One of the most powerful tools for a well-funded retirement is to start saving for your retirement at an early age. The sooner you start saving, the better off you will be.
Action item: Open a retirement account and start saving now. Increase the percent of your pay that you place in tax-advantaged retirement saving accounts. This includes IRAs, 401(k)s, and other plans.
3. Maximize employer contributions
Many employers have plans available to help their employees save for retirement. If your company has a pension plan, understand how it works and how much you can expect to receive upon retirement. If your company has a retirement plan contribution-matching program, take full advantage of this free money by making minimum contributions required to receive this employer match.
Action item: Review your employer-provided retirement saving options. Maximize the benefits they are providing.
4. Consider working after retiring
Do you plan on working during retirement or avoiding work at all costs? Do you plan on having a pension or Social Security covering all your retirement needs or none of it? Too often retirees plan the extremes, but reality is something in between. For example, if you are someone who plans to have your pension plan fail and Social Security go broke, you may be taking too conservative an approach.
Action item: Create a range of retirement funding scenarios, not just the worst-case or best-case scenario. Consider no work or part-time work. Think about some contribution from Social Security and potential pension income if your employer has a program.
5. Understand the true nature of your retirement
Are you being realistic in your future retirement plans? Have you correctly estimated the cost of health insurance? Have you really thought about the impact of relocating to a warmer climate? How important is living close to family and friends? Will you really downsize your home after the kids leave?
Action item: If you have a retirement plan that includes relocating or traveling to far-off places, consider test-driving this idea before you implement it. You may be surprised at the result.
Retirement should be something to look forward to, especially with a little planning.
With tax season in the rearview mirror, now is the time to take a hard look at your federal and/or state withholdings to ensure next year’s tax bill does not surprise you.
A review is more important than ever.
There are a number of tax code changes that will impact the amount of tax you pay next year. So much so, that if you do not forecast your tax obligation now, you may be in for a very unpleasant surprise. This is true because:
No more advance payments for the Child Tax Credit. The one-year requirement of the IRS to pay out half of the Child Tax Credit in advance is no longer in place. So you will not only need to plan for this change, but it will also impact your tax return.
Child Tax Credits are lower. In addition, the Child Tax Credit amount for each child is rolling back to the 2020 dollar amount of $2,000. This could mean as much as $1,600 in lower credits for each of your children.
Dependent care credits are lower. The dependent care credit is also lower in 2022. So if both you and your spouse work and have daycare expenses, you will need to forecast the impact of this on this year’s tax obligation.
New 1099-K reporting may require estimated tax payments. The IRS will be receiving millions of new informational tax forms reporting activity from those using digital payment platforms. So for those reselling event tickets, using sites like eBay, Esty and Amazon, you will now need to account for all this income. It may now require quarterly estimated tax payments throughout the year.
Be aware of life events. In addition, a change in your situation could create the need to review your withholdings. It could be due to a job change, selling or buying a home, getting married or divorced, or having a birth or death in the family. Whatever the cause, be aware of the potential change and put a sharp pencil to revising your withholdings.
High inflation is impacting everything. Finally, consider the impact of inflation on your situation. This is especially important if you have a small business as higher costs of labor and supplies could dramatically impact your pending tax bill.
Calculating and making adjustments
Using the IRS calculator. The IRS has an online tool to help you calculate how much you will need to withhold. In order to get an accurate reading, you need to have a copy of your latest paycheck or last quarterly estimated tax filing (Form 1040 ES) and a copy of your last tax return.
The IRS tool is here: IRS Withholding Calculator
Simply follow the tool’s instructions and compare the tool’s recommendation to your current withholdings.
Get expert help if necessary. The IRS recently changed the way it calculates recommended withholdings. While the intent is well intended, many are confused by the change. It is always a good idea to call to review your situation if you have any doubts. But do it now, while there is plenty of time in the year to build the proper withholding amount.
File a new withholding form with your employer. Whether you’re paying too much or too little, you can fix it by filling out a new W-4 form and giving it to your employer. If you’re filing quarterly estimated taxes, you can adjust your next quarter’s estimate in a similar way.
In a perfect tax world, you would not owe too much nor get too large of a refund. Think of overpayments as an interest-free loan the government borrowed from you. Conversely, a shortfall means writing a large check when you file your tax return. That’s a surprise few of us want.
Contact Loeffler Financial Group to start planning for your future, 717.393.7366!
Taxpayers should file their tax return by the deadline even if they cannot pay their full tax bill. Taxpayers who owe tax and don’t file on time, maybe charged a failure-to-file penalty. This penalty is usually five percent of the tax owed for each month, or part of a month that the tax return is late, up to 25%.
If an individual taxpayer owes taxes, but can’t pay in full by April 18, 2022, deadline, they should:
File their tax return or request an extension of time to file by the April 18 deadline.
- People who owe tax and do not file their return on time or request an extension may face a failure-to-file penalty for not filing on time. Loeffler Financial Group can file your extension for you per your request.
- Taxpayers should remember that an extension of time to file is not an extension of time to pay. An extension gives taxpayers until October 17, 2022, to file their 2021 tax return, but taxes owed are still due April 18, 2022.
To get an extension to file, taxpayers must do one of the following:
- File Form 4868 through your tax professional, such as one of the tax experts at Loeffler Financial Group
- Submit an electronic payment with Direct Pay, Electronic Federal Tax Payment System or by debit, credit card or digital wallet and select Form 4868 or extension as the payment type.
Pay as much as possible by the April 18 due date.
- Whether filing a return or requesting an extension, taxpayers must pay their tax bill in full by the April deadline to avoid interest and penalties.
- People who do not pay their taxes on time will face a failure-to-pay penalty.
- The IRS has options for taxpayers who can’t afford to pay taxes they owe.
Set up a payment plan as soon as possible.
- Taxpayers who owe but cannot pay in full by April 18 don’t have to wait for a tax bill to set up a payment plan.
- They can apply for a payment plan on IRS.gov.
- Taxpayers can also submit a payment plan request using Form 9465, Installment Agreement Request.
Interest is based on the amount of tax owed and for each day it’s not paid in full. Interest rates are determined every three months and can vary, based on type of tax; for example, individual or business-tax liabilities. Loeffler Financial Group is here to assist you with any tax questions you have.
Need to file your tax return still? Call 717-393-7366 to book your appointment with one of our tax experts.