Do you know someone that recently passed away? Do you know that after your death, the distribution of retirement accounts, life insurance policies, annuities, and bank and investments accounts are guided by beneficiary designations. If those designations are outdated, unspecific, or wrong, your assets may not be distributed the way you would like.

Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.

Here are three items to consider:

Be specific and stay current. When you name a beneficiary, your assets can pass directly to that person or entity without going through a legal process called probate. So make sure you update the designations for life events such as divorce, remarriage, births, deaths, job changes, and retirement account conversions. Likewise, keep your beneficiary designation forms in a safe location, and maintain current copies with your financial institution, attorney, or advisor.

Think about unexpected outcomes. You have to be alert for the effect of taxes. For example, if the money in your accounts is distributed directly to your heirs, they may be stuck with a large unexpected tax bill. If you are wealthy, estate tax may also play a role. In 2016, the estate tax exclusion is $5.45 million and the top estate tax rate is 40%. Another concern: If one of your designated beneficiaries is disabled, government benefits may be reduced or eliminated by the transfer of assets. You may want to consult an attorney to establish a special needs trust to ensure your loved one is not adversely affected.

Name contingent beneficiaries. If your primary beneficiary dies, having a backup, or contingent, selection will ensure that your assets are properly distributed. In some cases, a primary beneficiary may choose to disclaim, or waive, the right to the assets. In that case, contingent beneficiaries can step up to primary position.

Beneficiary designations are an important part of estate planning and the items we have discussed will ensure that your wishes and intentions will be followed.

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Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com

When you go out and eat, put gas in your car or pay for your business expenses, I’m going to assume that you are either using a credit card or a debit card. In your mind, you might think they are the same. But there are differences that you need to be aware of.

Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.

Here are some differences that you need to be aware of:

1. Cash availability and fees

With a credit card, the money is not immediately taken out from your bank account. And as long as you pay back the credit card company within the allowed period, you won’t be charged interest on the money owed. And you don’t want to make a late payment – interest can build up quickly on credit cards.

In contrast, debit cards are linked to your personal bank account, so you’re using your own money and the charges are automatically deducted from your account. However, you might be charged extra fees on top of interest for any overdrafts.

2. Personal finance and budgeting

Earl Wilson said that there are three kinds of people: “The haves, the have-nots and the have-not paid what they bought.” You don’t want to be in the last group!

With credit cards, you might tend to overspend since you have available cash in a form of a personal loan. On the other hand, because you don’t carry a balance on the debit card, you’re more likely to stick with your budget and not overspend.

3. Consumer liability protection

Federal laws protect you in the event you need to dispute credit card charges and usually cap your liability at $50. Debit cards offer fewer protections than credit cards, including a sliding scale of liability depending on when you notify your financial institution.

Which card is best for you? The answer is generally a mix of the two is a good compromise. You can use a credit card wisely to bolster your credit, while still paying for everyday purchases with a debit card.

If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com

Can you deduct a work-related education costs?
I got this question from one of my clients. So as an accountant, I will answer you with my favorite words: “It depends.”

Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.

So, are you planning to go back to school to get an advanced degree or just to brush up on your work skills? The answer to those questions, will determine if you might be able to deduct what you pay for tuition, books, and other supplies.

So if you’re self-employed or an employee, you may be able to claim a deduction if the training is necessary to maintain your skills or is required by your employer.

However, just remember that even when the education meets those two tests, if you’re qualified to work in a new trade or business when you’ve completed the course, your expenses are personal and nondeductible. That’s true even if you do not get a job in the new trade or business.

Work-related education expenses are an itemized deduction when you’re an employee and a business expense when you’re self-employed. You may also be eligible for other tax benefits, such as the lifetime learning credit.

So next time you plan on going back to school, just make sure you understand issues re: work-related education.

If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com

Are you working for someone or are you working for yourself?
In regards to retirement plans, there are some things you need to be aware of so you can take advantage of the situation.

Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.

Here are three things you need to consider:

1. Maximize employer matching. If your employer offers a 401(k) plan, try to put in at least the contribution amount in order to receive the maximize amount your company will match. Consider this free money! This also applies to self-employed. You can set-up a profit-sharing plan that will allow you to contribute up to 25% of your salary. This is tax deductible to the business but not taxable to the employee. It’s a win-win!

2. Try to catch-up. If you’re age 50 or older, you are allowed to make extra contributions to your retirement plans. These “catch-up” contributions depend on the type of retirement plan. Here is the list of catch-up items: IRA – $1,000, Simple – $3,000, and 401-K & 403-b – $6,000.

3. Maximize total contribution limit. The total limit for 2016 is $53,000. So if you are an employee, try to take advantage of any of your company’s retirement plans. Now, if you are the employer, try to structure different plans in order to maximize your contributions up to the limit.

There you go! Consider these strategies the next time you look into your retirement plans and I guarantee you…you would say…I lowered my tax now!

If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com

Have you ever received a letter in the mail with the initials IRS?

I bet a million dollars that your heart started pounding! And I would have heard you say, “Oh my God, I’m getting audited!”

Stop right there!

The good news is there are various reasons why IRS will give you a letter.

Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.

The IRS sends notices and letters for the following reasons:
• You have a balance due.
• You are due a larger or smaller refund
• IRS has a question about your tax return
• IRS needs to verify your identity
• IRS needs additional information
• IRS changed your return
• IRS We need to notify you of delays in processing your return

Your thinking, “What now?”

Here are your next steps:

Read – the letter contains valuable information, so please read it carefully. If the IRS changed your return, compare the information on the letter with your original return.

Respond – don’t ignore the response due date of the letter. Respond or if you don’t have the information, call and request for an extension.

Pay – if you agree with the changes, then you can pay online or issue a check.

Keep a copy of your notice or letter – this is very important since you might need these at a later date.

Contact us – you can contact the IRS or if all else fails, you can contact us for assistance.

So there you go. You’ve learned the reasons and the steps to take when you receive an IRS letter or notice. So next time, when your receive one, instead of freaking out, I would hear you say, “I got this Noel.”

If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com

Did you recently move or change your home or business mailing address? If so, here are the forms you need to be aware of.

Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.

Use Form 8822 Change of Address to notify the IRS of a change to your home mailing address. For business, use Form 8822-B Change of Address or Responsible Party – Business to notify the IRS if you changed your:

• Business mailing address
• Business location or
• Identity of your responsible party

If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com

Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.
Here’s a tax question, I got from one of my clients:

Should I use my retirement monies to pay off debt?

Here are the facts of the case:

Client has two credit card debts. One credit card has a balance of $40,000 at 20% and another one has a balance of $10,000 at 9%. He wants to pay off both credit cards by taking out some retirement monies? He just wants peace of mind that those credit cards have been taken care of. So what do we do?

Great question!

The first thing you need to do is to determine your total tax rate. You need to find out both your income tax and the withdrawal penalty rate. The sum is the total tax rate that you need to apply to the retirement amount you want to take out. So for example, your total tax rate is 40% (30% income tax rate and 10% withdrawal penalty rate) and you want to take out $50,000 to pay off your debt, you will be paying $20,000 in taxes ($50K x 40%)! Ouch!

In order to avoid paying taxes, here are the LowerMyTaxNow strategies:

1. You can take out a home equity line of credit. The interest in the first $100,000 is tax deductible. You just exchanged a non-deductible interest to a deductible amount to give you additional tax savings.

2. You can max your 401-K to the extent of the employer’s matching. The rest can be applied toward paying down your credit card debts.

3. You can borrow money from your 401-K. That way, you will avoid the $5,000 of withdrawal penalty.

4. You can negotiate your interest rate with your credit card company with a better rate if you have a good credit.

5. Transfer balances to a lower interest credit cards.

To summarize, make sure that you look at alternative options before taking out retirement monies to pay off debts. That way, you can avoid paying huge amount of taxes and maximize the use of your monies.

If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.

Is your kid planning to work this summer? If so, make sure you know the tax basics.

Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.

Here are four things you need to consider if your kid decides to get a summer job:

Tax returns. Assuming no other sources of income, your child can earn up to $6,300 in 2016 before a tax return has to be filed. However, if income tax is withheld from paychecks, your kid will have to file a return to claim a refund.

Federal income tax withholding. When hired, your child will have to fill out Form W-4, Employee’s Withholding Allowance Certificate. This form tells the employer how much federal income tax to withhold. If the job involves tips, remember that tips are taxable income. Have your child maintain records of amounts received.

Financial aid. Summer earnings can affect eligibility for college financial aid. If you’re counting on financial aid, check out the earnings limit ahead of time.

Retirement saving. Consider encouraging your child to open a Roth IRA. Amounts invested in a Roth can grow tremendously due to tax-free compounding over many years. As an incentive, you might match any amounts your child is willing to save.

To recap, consider these tax basics when you kid gets a summer job.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.

Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.

If you hold foreign bank or financial accounts, or have signature authority over such accounts, and the total value of all your accounts exceeds $10,000 at any time during the calendar year, you may be required to file a Treasury Department report known as the FBAR.

It’s easy to overlook this requirement because it’s separate from your federal income tax filing, with a different deadline and strict rules.”FBAR” refers to Form 114, Report of Foreign Bank and Financial Accounts. Your Form 114 must be filed electronically with the Treasury Department no later than June 30. No filing extension is available. So, please watch out for the filing requirement due date.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow

Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.

Do you own a rental property where you have “used up” most or all of your depreciation? You want to sell the old property and buy a new one so you can start benefiting from the depreciation deduction again. You’re thinking: Can I do that? Answer: Absolutely!

Here are 3 tax strategies that you can use:

1. Take advantage of the suspended rental losses – if your income is more than $150K, the IRS will suspend your current rental losses and will be carried over to future tax years indefinitely (exception applies for RE professional). Any carried-over rental losses not used can be claimed if your income will permit or fully expensed during the year you sell the property to offset potential capital gains.

1. Key Tax rate – if you are in the 10%-15% tax bracket and you held the rental for more than a year, then you can pay “0” capital gains rate. Yes! You heard that right…zero! The key here is proactive planning. Make sure you postpone some income and increase your deductions in order to be in 10%-15% tax rate.

1. Installment sale – you can spread and report the capital gains over a number of years in order to spread the tax and create a future revenue stream.

To recap, take advantage of the strategies above so you can minimize or spread your taxes and start getting the tax benefits from depreciation deduction again.

All these tax laws represent summarized concepts and cannot be implemented without fuller understanding of your exact situation. For further information and assistance, please contact:

Noel Dalmacio, CPA, CFP, MS Tax Telephone no: (949) 336-1345  

Email: noel@dalmaciocpa.com

Website: www.dalmaciocpa.com  www.lowermytaxnow.com

 Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.