A Personal Financial Specialist, or PFS, is an individual who is highly qualified to offer advice on a variety of financial issues and has earned the PFS credential from the American Institute of Certified Public Accountants. He or she can help you establish and build an investment portfolio, minimize your taxes, assist with estate planning, recommend insurance, and help you plan for retirement. It is possible for you to do all of these things on your own or to work with separate advisers in each wealth management area, but a PFS is a one-stop shop who can organize the process and focus your efforts. A PFS provides personalized attention and advice based on your specific circumstances.
Setting Goals and Creating a Financial Plan
There are three things you and your PFS will do initially and on an ongoing basis to determine how best to manage your wealth:
- First, you will assess your current situation.
- Then, you will set financial goals and choose the means to achieve them.
- As time passes, you will evaluate your progress toward your goals, determine if those goals still apply, and make adjustments to your plan when necessary.
Putting Things in Perspective
Statistics on financial planning can be frightening when you think about how quickly the years pass and retirement arrives. According to BusinessInsider.com, only 50% of Americans have more than a single month’s income saved. Many people are also unaware of what they are spending and how their current spending habits affect their long-term savings goals. A PFS will evaluate your current financial position, analyze your finances from a uniquely professional viewpoint different from your own, and help you determine what changes must be made now to help achieve your long-term goals.
Empowering You Financially
Working with a PFS helps you put your current earnings, your projected earnings, and your long-term outlook into proper perspective. He or she does not make decisions for you or take control of your money. Instead, the two of you work together to determine the appropriate financial path you should be following. It is entirely up to you whether or not you want to act on the advice of a PFS.
The world of finance and wealth planning can feel overwhelming, especially if you are just beginning to consider your financial future. A PFS can provide information, education, and guidance to help you get a solid grip on your financial situation.
Every year changes are made to the tax law that affect the way you manage your money throughout the year and how you file your tax return in the new calendar year. As soon as you are comfortable with one aspect of tax law, changes are made and you must relearn everything you knew. Working with an experienced tax attorney makes it easier to deal with an ever-changing situation, but it is also important to have a general understanding of the current laws.
What do you need to know about the most recent changes to tax laws?
Effect of ACA (i.e.; Obamacare) on Your Taxes
The Affordable Care Act requires you to carry a minimum amount of health insurance. If your plan does not meet the requirements, you will be forced to pay a fine, which in 2014 equals 1% of your annual income or $95 for each person you claim as a dependent. Further changes could be enacted in the coming years, but most expect the fine to be higher in 2015. At this point, it is too late to apply for coverage to avoid the 2014 penalty, so speak with your tax attorney to determine the best way to handle the fee.
The ACA also included an additional 3.8% tax on investment income. The tax applies to those making more than $200,000 (or $250,000 as a married couple filing jointly), so try to realize capital gains during years you earn less than those limits. The use of income timing, installment sales, and other tax deferral strategies can be effective in managing this new tax.
Finally, the ACA requires a new 0.9% Medicare health insurance tax on wages for those earning more than $200,000. If you are self-employed, you should plan for this additional tax when calculating your estimated tax payments. If you are an employee, the tax will be added to your Medicare tax in your paycheck.
Energy tax credit
Energy tax credit opportunities have been extended to 2016, so you are still able to get a credit for certain energy efficient upgrades to your home. In most cases, the credit is 30% of the total cost of the product. If you were thinking of putting off utility or other upgrades until after the first of the year, you might want to reconsider so you are eligible to claim the credit on this year’s tax return.
In previous years, you were able to deduct medical expenses that surpassed 7.5% of your adjust gross income, but as of 2013, you can deduct them only if they surpass 10%. The 7.5% limit remains the same for those over 65 years of age. Despite the increase in the limitation, it is still important to plan for this opportunity when possible. For instance, paying a medical bill in one lump sum could qualify you for a tax break, whereas staggering the payments could result in a complete loss of tax benefits.
If you have questions about the most recent changes to the tax laws or you need assistance with tax planning, contact an experienced tax professional. Feel free to contact us to answer your questions at 516.537.4440
Personal Tax and Financial Planning 2014 – 2015: What You Can Do Now to Save Money Now
If you are like most people, you experience an end-of-year rush that leaves you feeling exhausted and frustrated. Tax and financial planning is no different – the change in the calendar and the coming tax season after the New Year loom, and you want to do all you can now to save money. Luckily, there are a few important moves you can squeeze in now to make things a little easier when 2015 tax season arrives.
Remember, as you make decisions, any planning and strategy you employ must apply to both 2014 and 2015. A multi-year outlook ensures anything you do to save taxes this year won’t cost you more in the coming year. Also, be aware of the Alternative Minimum Tax. What works now could increase tax problems in the future. People who have many dependents, deduct state and local tax, exercise incentive stock options, or enjoy large capital gains should expect to pay this alternative tax.
Income and Deductions
Postpone income until 2015 and accelerate deductions into 2014 to lower your 2014 tax bill. This strategy may enable you to claim larger deductions, credits, and other tax breaks for 2014 that are phased out over varying levels of adjusted gross income. These include child tax credits, higher education tax credits, and deductions for student loan interest. Postponing income is also desirable for those taxpayers who anticipate being in a lower tax bracket next year due to changed financial circumstances. Note, however, that in some cases, it may pay to actually accelerate income into 2014. For example, this may be the case where a person’s marginal tax rate is much lower this year than it will be next year or where lower income in 2015 will result in a higher tax credit for an individual who plans to purchase health insurance on a health exchange.
The holidays are a time for giving and charitable contributions are no exception. Many people feel generous this time of year, and tax-wise it can pay off. Keep in mind donations charged on a credit card are deductible in the year charged, not when you make your payment. This means you can squeeze in a few donations before the end of this year and not need to make the payment until your bill arrives in January. You can give generously without leaving yourself short on funds for the holiday season.
Make Changes to Your IRA Funds
Converting traditional IRA funds to a Roth IRA can save you money over the long-term if your tax rate this year is lower than it will be in the future. Wiggle room in your current bracket also allows you to absorb a small Roth IRA conversation without forcing you into a higher tax bracket this year.
Also, don’t forget to make a tax deductible contribution to your traditional IRA or 401(k) retirement account if you are eligible.
Update Estate Planning
Recent changes concerning federal and state estate tax could mean it’s time to take a look at your current estate plan, if any, or finally implement an estate plan for the first time. In addition to changes in the law, changes in your personal life might be cause for a review of your estate plan that could lead to saving you money and improving your family’s situation in the future.
Making gifts sheltered by the annual gift tax exclusion before December 31st can save gift and estate taxes. You can give $14,000 in 2014 to each of an unlimited number of individuals but you can’t carry over unused exclusions from one year to the next. The gifts also may save family income taxes where income-earning property is given to family members in lower income tax brackets who are not subject to the kiddie tax.
Taking action now can reduce your tax liability this year and next. Unfortunately, many people get caught up in the hustle and bustle of the holiday season and miss out on this last minute opportunity to save money. Waiting reduces your options and could be a big financial mistake. To make the most of your circumstances and take advantage of end of year savings, contact a financial planning and tax expert for more information. Feel free to call us to discuss your situation.