Email UpdatesCreditors keep their evaluation standards secret, making it difficult to know just how to improve your credit rating. Nonetheless, it is still important to understand the factors that determine creditworthiness. Periodically reviewing your credit report can also help you protect your credit rating from fraud--and you from identity theft.
Many factors are used in determining credit decisions. Here are some of them:
Credit reports are records of consumers' bill-paying habits, but do not include FICO credit scores. Also referred to as credit records, credit files, and credit histories, they are collected, stored, and sold by three credit bureaus, Experian, Equifax, and TransUnion.
The Fair Credit Reporting Act (FCRA) requires that each of the three credit bureaus provide you with a free copy of your credit report, at your request, every 12 months. If you have been denied credit or believe you've been denied employment or insurance because of your credit report, you can request that the credit bureau involved provide you with a free copy of your credit report - but you must request it within 60 days of receiving the notification.
You can check your credit report three times a year for free by requesting a credit report from a different agency every four months.
This federal law was passed in 1970 to give consumers easier access to, and more information about, their credit files. The FCRA gives you the right to find out the information in your credit file, to dispute information you believe inaccurate or incomplete, and to find out who has seen your credit report in the past six months.
Credit reports contain symbols and codes that are abstract to the average consumer. Every credit bureau report also includes a key that explains each code. Some of these keys decipher the information, but others just cause more confusion.
Read your report carefully, making a note of anything you do not understand. The credit bureau is required by law to provide trained personnel to explain it to you. If accounts are identified by code number, or if there is a creditor listed on the report that you do not recognize, ask the credit bureau to supply you with the name and location of the creditor so you can ascertain if you do indeed hold an account with that creditor.
If the report includes accounts that you do not believe are yours, it is extremely important to find out why they are listed on your report. It is possible they are the accounts of a relative or someone with a name similar to yours. Less likely, but more importantly, someone may have used your credit information to apply for credit in your name. This type of fraud can cause a great deal of damage to your credit report, so investigate the unknown account as thoroughly as possible.
In light of numerous credit card and other breaches, it is recommended that you conduct an annual review of your credit report. It is vital that you understand every piece of information on your credit report so that you can identify possible errors or omissions.
The Fair Credit Reporting Act (FCRA) protects consumers in the case of inaccurate or incomplete information in credit files. The FCRA requires credit bureaus to investigate and correct any errors in your file.
If you find any incorrect or incomplete information in your file, write to the credit bureau and ask them to investigate the information. Under the FCRA, they have about thirty days to contact the creditor and find out whether the information is correct. If not, it will be deleted.
Be aware that credit bureaus are not obligated to include all of your credit accounts in your report. If, for example, the credit union that holds your credit card account is not a paying subscriber of the credit bureau, the bureau is not obligated to add that reference to your file. Some may do so, however, for a small fee.
If you need help obtaining your credit reports or need assistance in understanding what your credit report means, don't hesitate to call.
Educators can take advantage of tax deductions for qualified out-of-pocket expenses related to their profession such as classroom supplies, training, and travel. As such, as the new school year begins, teachers, administrators, and aides should remember to keep track of education-related expenses that could help reduce the amount of tax owed next spring.
Prior to tax reform, educators could choose one of two methods for deducting qualified expenses: Claiming the Educator Expense Deduction (up to $250) or, for those who itemized their deductions, claiming eligible work-related expenses as a miscellaneous deduction on Schedule A, Itemized Deductions.
Taxpayers should note, however, that under tax reform, miscellaneous itemized deductions are no longer deductible for tax years 2018 through 2025.
Teachers and other educators can also take advantage of various education tax benefits for ongoing educational pursuits such as the Lifetime Learning Credit or, in some instances depending on their circumstances, the American Opportunity Tax Credit.
Educators can deduct up to $250 of unreimbursed business expenses. If both spouses are eligible educators and file a joint return, they may deduct up to $500, but not more than $250 each. The educator expense deduction is available even if an educator doesn't itemize their deductions. To take advantage of this deduction, the taxpayer must be a kindergarten through grade 12 teacher, instructor, counselor, principal or aide for at least 900 hours during a school year in a school that provides elementary or secondary education as determined under state law.
Those who qualify can deduct costs of books, supplies, computer equipment and software, classroom equipment, and supplementary materials used in the classroom. Expenses for participation in professional development courses are also deductible. Athletic supplies qualify if used for courses in health or physical education.
Educators should keep detailed records of qualifying expenses noting the date, amount, and purpose of each purchase. This will help prevent a missed deduction at tax time. Taxpayers should also keep a copy of their tax return for at least three years. Copies of tax returns may be needed for many reasons. A tax transcript summarizes return information and includes adjusted gross income and are available free of charge from the IRS.
Don't hesitate to call if you have any questions about tax deduction available to educators including teachers, administrators, and aides.
If you're conscientious about financial reporting, you may already have a sense of your company's worth, but in some instances, you might need a formal business valuation, such as:
There isn't a single formula for valuing a business, but there are generally accepted measures that will give you a valid assessment of your company's worth. Here are three tips that you can use to give your business a more accurate valuation.
1. Take a close look at how your business operates. Does it incorporate the most tax-efficient structure? Have sales been lagging or are you selling most of your merchandise to only a few customers? If so, then consider jump-starting your sales effort by bringing in an experienced consultant who can help.
Do you have several products that are not selling well? Maybe it's time to remove them from your inventory. Redesign your catalog to give it a fresh new look and make a point of discussing any new and exciting product lines with your existing customer base.
It might also be time to give your physical properties a spring cleaning. Even minor upgrades such as a new coat of paint will increase your business valuation.
2. Tangible and intangible assets. Keep in mind that business valuation is not just an exercise in numbers where you subtract your liabilities from your assets, it's also based on the value of your intangible assets.
It's easy to figure out the numbers for the value of your real estate and fixtures, but what is your intellectual property worth? Do you hold any patents or trademarks? And what about your business relationships or the reputation you've established with existing clients and in the community? Don't forget about key long-term employees whose in-depth knowledge about your business also adds value to its net worth.
3. Choose your appraisal team carefully. Don't try to do it yourself by turning to the Internet or reading a few books. You may eventually need to bring in experts like a business broker and an attorney, but your first step should be to contact us. We have the expertise you need to arrive at a fair valuation of your business.
If you need a business valuation for whatever reason, please don't hesitate to call and speak to a tax and accounting professional who can help.
Many people use a tax professional to prepare their taxes. Anyone who prepares, or assists in preparing, all or substantially all of a federal tax return for compensation is required to have a valid Preparer Tax Identification Number (PTIN). All enrolled agents must also have a valid PTIN.
If you choose to have someone prepare your federal tax return, then you should know who can represent you before the IRS if there is a problem with your return. Here's what you should know:
Representation rights, also known as practice rights, fall into two categories:
Unlimited representation rights allow a credentialed tax practitioner to represent you before the IRS on any tax matter. This is true no matter who prepared your return. Credentialed tax professionals who have unlimited representation rights include:
Limited representation rights authorize the tax professional to represent you if, and only if, they prepared and signed the return. They can do this only before IRS revenue agents, customer service representatives and similar IRS employees. They cannot represent clients whose returns they did not prepare. They cannot represent clients regarding appeals or collection issues even if they did prepare the return in question.
For returns filed after December 31, 2015, the only tax return preparers with limited representation rights are Annual Filing Season Program Participants. The Annual Filing Season Program is a voluntary program. Non-credentialed tax return preparers who aim for a higher level of professionalism are encouraged to participate.
Other tax return preparers have limited representation rights, but only for returns filed before January 1, 2016. Keep these changes in mind and choose wisely when you select a tax return preparer.
Although the April filing deadline has come and gone, scam artists remain hard at work. As such, taxpayers should be on the lookout for scams that reference taxes or mention the IRS, especially during the summer and fall as tax bills and refunds arrive.
The two new variations of tax-related scams that are currently making the rounds are what the IRS has dubbed the "SSN Hustle" and the "Fake Tax Agency." The first involves Social Security numbers (SSNs) related to tax issues and the second threatens people with a tax bill from a fictional government agency. Both display classic signs of being scams.
The SSN Hustle
The latest twist includes scammers claiming to be able to suspend or cancel the victim's Social Security number. In this variation, the Social Security cancellation threat scam is similar to and often associated with the IRS impersonation scam. It is yet another attempt by con artists to frighten people into returning "robocall" voicemails. Scammers may mention overdue taxes in addition to threatening to cancel the person's SSN.
Fake Tax Agency
This scheme involves the mailing of a letter threatening an IRS lien or levy. The lien or levy is based on bogus delinquent taxes owed to a non-existent agency, "Bureau of Tax Enforcement." There is no such agency. The lien notification scam also likely references the IRS to confuse potential victims into thinking the letter is from a legitimate organization.
A Reminder about Phone and Email Phishing Scams
The IRS does not leave prerecorded, urgent or threatening messages. In many variations of the phone scam, victims are told if they do not call back, a warrant will be issued for their arrest. Other verbal threats include law-enforcement agency intervention, deportation or revocation of licenses.
Criminals can fake or "spoof" caller ID numbers to appear to be from anywhere in the country, including an IRS office. This prevents taxpayers from being able to verify the true caller ID number. Fraudsters also have spoofed local sheriff's offices, state departments of motor vehicles, federal agencies, and others to convince taxpayers the call is legitimate.
The IRS does not initiate contact with taxpayers by email to request personal or financial information. The IRS initiates most contacts through regular mail delivered by the United States Postal Service.
There are, however, special circumstances when the IRS will call or come to a home or business. Examples of when this might occur include times when a taxpayer has an overdue tax bill, a delinquent tax return or a delinquent employment tax payment, or the IRS needs to tour a business as part of a civil investigation (such as an audit or collection case) or during a criminal investigation.
If a taxpayer receives an unsolicited email that appears to be from either the IRS or a program closely linked to the IRS that is fraudulent, report it by sending it to [email protected]. The Report Phishing and Online Scams page provides additional details.
Taxpayers should also note that the IRS does not use text messages or social media to discuss personal tax issues, such as those involving bills or refunds.
If you have any questions or concerns about tax scams, help is just a phone call away.
The list of medical care services for a range of chronic conditions allowed to be provided by a high deductible health plan (HDHP) was expanded effective July 17, 2019. These medical services and items are limited to the specific medical care services or items listed for chronic conditions including hypertension, congestive heart failure, osteoporosis, asthma, depression, liver disease, and diabetes. Any medical care previously recognized as preventive care for these rules is still treated as preventive care.
Individuals covered by an HDHP generally may establish and deduct contributions to a Health Savings Account (HSA) as long as they have no disqualifying health coverage. To qualify as a high deductible health plan, an HDHP generally may not provide benefits for any year until the minimum deductible for that year is satisfied. However, an HDHP is not required to have a deductible for preventive care (as defined for purposes of the HDHP/HSA rules).
The Treasury Department and the IRS, in consultation with the Department of Health and Human Services, have determined that certain medical care services received, and items purchased, including prescription drugs, for certain chronic conditions should be classified as preventive care for someone with that chronic condition.
The expanded list includes (but is not limited to) beta-blockers, blood pressure monitors, inhaled corticosteroids, insulin, glucometers, Low-density Lipoprotein (LDL) testing, Selective Serotonin Reuptake Inhibitors (SSRIs), and Statins.
If you need more information about the expanded list of medical care services that are allowed and their associated chronic conditions, please call.
Proposed regulations were issued by the IRS on June 18, 2019, regarding the new 1.4 percent excise tax on the net investment income of certain private colleges and universities. While the new excise tax is estimated to affect 40 or fewer institutions, it applies to any private college or university that has at least 500 full-time tuition-paying students (more than half of whom are located in the U.S.) and that has assets other than those used in its charitable activities worth at least $500,000 per student.
The proposed regulations define several of the terms necessary for educational institutions to determine whether the section 4968 excise tax applies to them. The IRS guidance clarifies how affected institutions should determine net investment income, including how to include the net investment income of related organizations and how to determine an institution's basis in property.
These proposed regulations incorporate the interim guidance provided previously in IRS Notice 2018-55, Guidance on the Calculation of Net Investment Income for Purposes of the Section 4968 Excise Tax Applicable to Certain Private Colleges and Universities, stating that for property held by an institution at the end of 2017, the educational institution is generally allowed to use the property's fair market value at the end of 2017 as its basis for figuring the tax on any resulting gain.
ITINs (Individual Taxpayer Identification Numbers) are used by people who have tax filing or payment obligations under U.S. law but who are not eligible for a Social Security number. Under the Protecting Americans from Tax Hikes (PATH) Act, ITINs that have not been used on a federal tax return at least once in the last three consecutive years will expire Dec. 31, 2019. Furthermore, ITINs with middle digits 83, 84, 85, 86 or 87 that have not already been renewed will also expire at the end of the year. Others do not need to take any action.
Affected taxpayers who expect to file a 2019 tax return in 2020 must submit a renewal application by filing Form W-7, Application for IRS Individual Taxpayer Identification Number. With nearly two million ITINs set to expire at the end of 2019, affected taxpayers should submit their renewal applications as soon as possible to avoid refund delays next year.
The IRS began sending the CP48 Notice, You must renew your Individual Taxpayer Identification Number (ITIN) to file your U.S. tax return, in early summer. This notice explains the steps to take to renew the ITIN if it will be included on a U.S. tax return filed in 2020.
Taxpayers who receive the notice after acting to renew their ITIN do not need to take further action unless another family member is affected. ITINs with middle digits of 70 through 82 have previously expired. Taxpayers with these ITINs can still renew at any time if they have not renewed already.
Form W-7. To renew an ITIN, a taxpayer must complete a Form W-7 and submit all required documentation. Taxpayers submitting a Form W-7 to renew their ITIN are not required to attach a federal tax return. However, taxpayers must still note a reason for needing an ITIN on the Form W-7.
Family Option. Taxpayers with an ITIN that has middle digits 83, 84, 85, 86 or 87, as well as all previously expired ITINs, have the option to renew ITINs for their entire family at the same time. Those who have received a renewal letter from the IRS can choose to renew the family's ITINs together, even if family members have an ITIN with middle digits that have not been identified for expiration. Family members include the tax filer, spouse and any dependents claimed on the tax return.
Spouses and dependents residing outside of the U.S.. If your spouse or dependent lives outside the U.S., they only need to renew their ITIN if filing an individual tax return, or if they qualify for an allowable tax benefit (e.g., a dependent parent who qualifies the primary taxpayer to claim head of household filing status.) In these instances, a federal return must be attached to the Form W-7 renewal application.
As a reminder, the IRS no longer accepts passports that do not have a date of entry into the U.S. as a stand-alone identification document for dependents from a country other than Canada or Mexico, or dependents of U.S. military personnel overseas. The dependent's passport must have a date of entry stamp, otherwise, additional documents are required to prove U.S. residency.
Federal tax returns that are submitted in 2020 with an expired ITIN will be processed. However, certain tax credits and any exemptions will be disallowed. Taxpayers will receive a notice in the mail advising them of the change to their tax return and their need to renew their ITIN. Once the ITIN is renewed, applicable credits and exemptions will be restored, and any refunds will be issued.
Don't hesitate to call if you have any questions about renewing ITINs.
Let's say you run a home improvement retail outlet, and one of the things you sell is doors. You might sell their parts -- door frames, hinges, doorknobs, etc. -- individually, in case a customer needs to replace a piece. You may also want to sell all of the individual components as a kit and give your buyer a price break for purchasing them all together.
QuickBooks calls these assemblies; sometimes they're referred to as kits. Just as you'd create an individual inventory part, you can group related parts together and create an item that you would sell as a package.
A couple of caveats here: You can only build assemblies in QuickBooks Premier and above. If you need this feature and are using QuickBooks Pro, talk to a QuickBooks professional about upgrading. Second, not all of you are using the latest versions of the software so will use QuickBooks Premier 2018 in the examples here.
Before you can start working with assemblies, check your QuickBooks settings to make sure they're correct. Open the Edit menu and select Preferences, then Items & Inventory | Company Preferences. Click on the box in front of Inventory and purchase orders are active it's not already checked. If you want QuickBooks to deduct the quantity of items that have already been entered on sales orders, check that box (we recommend this, so you're not selling items that have already been promised). Then make sure the button in front of When the quantity I want to sell exceeds Quantity Available is filled in, for the same reason.
Open the Lists menu and select Item List. Open the drop-down list under Item in the lower left corner and click New. In the window that opens, click the down arrow under Type and select Inventory Assembly. Enter an Item Name/Number in the corresponding field in the window that opens. Don't check the Subitem of or the I purchase this assembly item from a vendor boxes and ignore Unit Of Measure.
Again, depending on the version of QuickBooks you're using, you may see different fields in the Inventory Information box at the bottom of this window. But there are some standard elements you should find in this window no matter the version. They include:
The Inventory Information box at the bottom of this window might contain fields for information like the Asset Account, quantity On Hand, and the number of items on purchase orders and sales orders. Once your inventory assembly is saved, it will appear in your Item List.
When you need to actually create kits, you'll open the Vendors menu and select Inventory Activities, then Build Assemblies. You'll select the Assembly Item from the drop-down list in the upper left corner, which will open a list of the components needed and their quantity on hand. You'd enter the number of kits you want (the maximum possible appears below the table) and then click one of the Build buttons. The next time you look at the kit in your Item List, you'll see that its quantity has increased.
The concept of assemblies is easy to understand, but if you haven't worked with accounts and inventory much, you may find creating kits in QuickBooks to be a bit of a challenge. Inventory levels can be a real problem if they get out of whack, and accounts must be assigned correctly to avoid inaccuracies in reports and taxes. If you need assistance as you get started with this task, please call.
Employees Who Work for Tips - If you received $20 or more in tips during July, report them to your employer. You can use Form 4070.
Employers - Social Security, Medicare, and withheld income tax. File Form 941 for the second quarter of 2019. This due date applies only if you deposited the tax for the quarter in full and on time.
Employers - Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments in July.
Employers - Social Security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments in July.
You can think of Asset Allocation like slicing up a pie. The pie is your investment portfolio, and the slices are made up of different forms of investments such as cash and various securities. These might include such investments as stocks, bonds, mutual funds, ETFs, REITs, private equity, and cash equivalents. The idea here is to diversify your investments to reduce risk because each type of securities investment has a different risk profile and correlation to the others in the portfolio.
For instance, when bonds fall in value, stocks often rise at the same time. By having both in your portfolio, this can help to reduce risk by compensating for the loss in one with the gain in the other. Likewise, when the stock market begins to fall, the real estate market might be climbing. By diversifying across different types of investments, you can help to fortify your portfolio, so it is better able to cope with changing market conditions.
The percentages of your portfolio that are allocated to each type of investment will be determined by your asset allocation model. The asset allocation model you use will typically be designed to fit well with your risk tolerance preferences and financial goals. You will divide your portfolio up into asset classes to fit with these goals and tolerances.
Additionally, each asset class can further be subdivided up into individual investments to diversify it further and continue to reduce risk while maximizing returns within your acceptable risk parameters.
For example, if your asset manager recommends an allocation of 50% to be given to stocks, they may choose to further subdivide that across several industries such as technology, pharmaceuticals, consumer retail, etc. They may also choose to allocate according to market cap, with varying allocations going to large-cap, mid-cap, and small-cap companies.
Throughout many decades of history, it has been more profitable to invest in corporate stocks than to invest in bonds. However, there is more than one reason to invest, and because of that, there are reasons to invest in each.
For example, a retiree who is depending on the performance of their investment portfolio to provide a day-to-day income might be unwise to invest it in stocks which are exposed to constant market fluctuations and need to be sold to provide income. Bonds, on the other hand, provide income while you still hold them and are not affected in the same way by market fluctuations, making them a much more stable and lower risk investment which is more appropriate to the needs of a post-retirement portfolio.
On the other hand, a young professional who is fresh out of college and has just begun and long career in a chosen field may be better served by a more aggressive allocation in favor of corporate stocks. The younger person will have adequate time to recover from market fluctuations, and as a result, will be able to grow their net worth as they approach retirement. This net worth will be necessary later on in life when they progressively re-allocate to shift gradually away from stocks and towards bonds as they slowly approach retirement age. Finally, when they end up at their target retirement date, they may choose to shift their asset allocation towards bonds almost entirely, like in the previous example, to stabilize their net worth and income for the long term.
Generally speaking, the types of asset allocation models fall into four different categories: growth, income, preservation of capital, or balanced.
1. Growth models are typically used by those who are many years away from their target retirement date and have ample time to wait out market fluctuations. Their objective is to grow their net worth as much as possible within their risk tolerances during the time frame between the present day and their retirement date. The goal of these models is to grow long term wealth by increasing net worth.
One notable aspect of growth portfolios is that they are typically grown not only through the growth of the assets within the portfolio, but also grown by adding capital to them regularly through regular deposits. If the stock market is on a bull run, the growth portfolio model will benefit greatly and achieve maximum growth. However, in a bear market, the portfolio's value will also take the biggest hit relative to other asset allocation models.
2. Income portfolios are often used by retirees who need a stable, predictable income from their portfolio, and who are more interested in preserving their capital than in growing it. They will usually contain a large allocation of high-quality income-producing bonds or investment-grade debt obligations such as those from blue-chip companies, rather than growth stocks. It might also contain Real Estate Investment Trust shares (REITs), or Treasury Notes.
Another type of account which might use an income model is that of a young widow who is living off of her deceased husband's life insurance policy payments. She cannot afford to risk her money in a growth account and needs reliable income so that she would be served by an income portfolio allocation.
3. Preservation of capital is temporary models and used because the portfolio owner needs to maintain quick access to their capital shortly. They may not wish to expose their portfolio to the necessary market fluctuations of growth models, or the lack of liquidity created by income models. The preservation of capital model might use cash, cash equivalents such as money market accounts, treasuries, or commercial paper. These accounts are often used temporarily because they miss out on most of the benefits of the other types of asset allocation models in favor of prioritizing the preservation of capital instead.
4. Balanced asset allocation is mix between the Growth and Income models. Many people prefer the balanced portfolio allocation model because of the emotional advantages. Yes, you read that right. You see, when you invest in a growth model, you will need to witness fluctuations in your portfolio and be ok with them. Sometimes they can be quite dramatic and scary, and it can be very tempting to sell at the bottom of the market or after downturns. However, this would make you lose capital. On the other hand, income portfolios, while less risky and providing more stability, can be quite boring.
You will need to watch the market make big runs where you could have experienced large gains in net worth but are missing out because of your conservative asset allocation in income-producing investments. A balanced portfolio addresses these issues by providing a combination of growth with risk and income with stability in the same portfolio. This way, your portfolio can still experience income while the growth side is in decline, and you won't need to miss out on opportunities afforded by market growth.
It is important to note that you will not likely choose any one of these models for the duration of your portfolio but will probably switch gradually from one to another over time, and then from that one perhaps on to yet another. Each asset allocation model serves its purposes, and it will be up to you and your investment advisor to determine which asset allocation model is right for you.
Is there a particular model you prefer for your current stage in life? Feel free to share with others in the comments below!
