| Thomas Samuelson | 0 Comments | Tax Advice | , , ,

You May Need to Make Estimated Tax Payments If…

You may have to make estimated tax payments if you earn income that is not subject to withholding, such as income from self-employment, interest, dividends, alimony, rent, realized investment gains, prizes, and awards.

You also may have to pay estimated taxes if your income tax withholding on salary, pension, or other income is not enough, or if you had a tax liability for the prior year. Please consult a professional with tax expertise regarding your individual situation.¹

How to Pay Estimated Taxes

If you are filing as a sole proprietor, partner, S corporation shareholder, and/or a self-employed individual and expect to owe tax of $1,000 or more when you file a return, you should use Form 1040-ES, Estimated Tax for Individuals, to calculate and pay your estimated tax. You may pay estimated taxes either online, by phone, or through the mail.²

How to Figure Estimated Tax

To calculate your estimated tax, you must include your expected adjusted gross income, taxable income, taxes, deductions, and credits for the year. Consider using your prior year’s federal tax return as a guide.

When to Pay Estimated Taxes

For estimated tax purposes, the year is divided into four payment periods, each with a specific payment due date. If you do not pay enough tax by the due date of each of the payment periods, you may be charged a penalty, even if you are due a refund when you file your income tax return.

Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in taxes after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller.³

  1. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties.
  2. IRS.gov, 2016
  3. IRS.gov, 2016

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2017 FMG Suite.

| Thomas Samuelson | 0 Comments | Accounting Advice, Tax Advice | ,

What If You Get Audited?

“Audit” is a word that can strike fear into the hearts of taxpayers.

However, the chances of an Internal Revenue Service audit aren’t that high. In 2016, the IRS audited 0.7% of all individual tax returns.¹

And being audited does not necessarily imply that the IRS suspects wrongdoing. The IRS says an audit is just a formal review of a tax return to ensure information is being reported according to current tax law and to verify that the information itself is accurate.

The IRS selects returns for audit using three main methods.²

  • Random Selection. Some returns are chosen at random based on the results of a statistical formula.
  • Information Matching. The IRS compares reports from payers — W2 forms from employers, 1099 forms from banks and brokerages, and others — to the returns filed by taxpayers. Those that don’t match may be examined further.
  • Related Examinations. Some returns are selected for an audit because they involve issues or transactions with other taxpayers whose returns have been selected for examination.

There are a number of sound tax practices that may reduce the chances of an audit.

  • Provide Complete Information. Among the most commonly overlooked information is missing Social Security numbers — including those for any dependent children and ex-spouses.
  • Avoid Math Errors. When the IRS receives a return that contains math errors, it assesses the error and sends a notice without following its normal deficiency procedures.
  • Match Your Statements. The numbers on any W-2 and 1099 forms must match the returns to which they are tied. Those that don’t match may be flagged for an audit.
  • Don’t Repeat Mistakes. The IRS remembers those returns it has audited. It may check to make sure past errors aren’t repeated.
  • Keep Complete Records. This won’t reduce the chance of an audit, but it potentially may make it much easier to comply with IRS requests for documentation.

Remember, the information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.

| Thomas Samuelson | 0 Comments | Accounting Advice, Tax Advice | , ,

Term vs. Permanent Life Insurance

The adequacy of life insurance coverage in the U.S. is shrinking, according to LIMRA, which keeps close tabs on the industry. In 2010, households had enough coverage, on average, to replace 3.5 years of income. Today they have enough to replace only 3 years’ income.

Furthermore, 4 in 10 households with children under age 18 said they’d be in immediate financial trouble if the primary wage earner died today.1

When considering life insurance, one of the most important factors to understand is the difference between term and permanent insurance. Here’s an inside look at both.

Term and Perm

Term life insurance is temporary; it provides a death benefit for a specific term, such as 10, 20, or 30 years. Unlike other types of life insurance, it does not accumulate a cash value. If the policyholder dies during that term, his or her beneficiaries receive the benefit from the policy. When the contract ends, so does the coverage.

This limited term leads to term life insurance’s main advantage: price. Generally, term life insurance costs less than permanent life insurance, especially if the purchaser is younger. This has the potential to free up funds for other household expenses.

Permanent insurance remains in place as long as the policyholder makes payments. In addition, permanent policies are designed to build up “cash value,” a cash reserve that accumulates with the policy. Typically, this cash reserve pays a modest rate of return. However, the policyholder has limited access to the funds.

Which Should You Choose?

Term life insurance can be designed to provide protection against upcoming expenses, such as putting children through college. Permanent life insurance, on the other hand, can be more useful for covering long-term financial needs, such as estate planning.

Many people find that they have a combination of short- and long-term needs. In such circumstances, it may be prudent to have both types: a basic level of permanent life insurance supplemented by a term policy. A review of your situation may help determine what type of life insurance is appropriate.

Several factors will affect the cost and availability of life insurance, including age, health and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.