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Before I jump into my suggestions for end-of-year tax planning, I want to say again how grateful I am to have you as a client, friend, or business associate. When I’m counting my Thanksgiving blessings this year, relationships like ours are at the top of the list! I am fortunate to work with, and alongside, such wonderful people. Thank you! This month I am using this space to share something important with you (although it’s not sexy): end-of- year tax planning. I know it feels like tax season just ended, but now is the time to start thinking about what lies ahead. Going into the holiday season, it’s important to remember that the Coronavirus Aid, Relief, and Economic Security (CARES) Act offers some temporary opportunities you may want to take advantage of in 2020. The CARES Act changed many policies, including the limits on business expenses, Social Security and Medicare tax requirements for employers, rules for net operating losses, business interest deductions, and qualified improvement property depreciation. It also allowed penalty-free IRA distributions of up to $100,000 for the year, where the tax liability can be paid over a three-year period. Many people will be impacted by the changes in required minimum distributions (RMDs), which was bumped up to age 72. They may also benefit from the 2020 distribution waiver option. That means you should reevaluate any automatic withdrawals you have planned for now or through the end of the year. If you don’t need the distribution for living expenses, you can avoid the tax consequences by not taking the distribution or rolling the distribution back into the account (unfortunately this option is not available for non-spouse owners of beneficiary IRAs). If you have taken an RMD distribution within the last 60 days, you may still have time to roll that distribution back into your account and avoid the additional tax liability. However, if a distribution was taken more than 60 days prior to today, the rollback option has expired.
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The human body contains enough fat to make seven bars of soap. No wonder it’s so hard to lose weight. It’s impossible to hum while holding your nose. Go ahead and try it! I actually tried.
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Have you ever noticed how much time MLB players spend looking at the balls? The average lifespan of an MLB baseball is only seven pitches.
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Tomatoes are
native to the Americas, so there was no such thing as tomato sauce in Italy until at least the 16th century. So, what would we eat if pizza and spaghetti weren’t created? Beer was legally classified as a soft drink in Russia until 2011. Actually, all beverages with less than 10% alcohol were classified as foodstuff.
Let’s consider the good side of all this year’s market volatility. Looking at the bigger picture, market downturns can be a good opportunity to move your tax-deferred assets into a tax-free Roth account.* You pay tax only on the value of the assets at the time of their conversion. So if you own a stock that you think has great potential for growth, and its value falls from $100 per share to $50 per share at the time of the conversion, you will only be required to pay tax on the $50 per share value. This situation creates one of the best opportunities to implement a conversion strategy. And there is no income limit for this strategy. Another factor that makes this strategy attractive is the fact that taxes are likely to increase due to all the debt the government has assumed this year. However, it is important to understand the extent of the tax consequences of moving tax-deferred assets to a Roth, so talk to a financial professional before taking action.
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The cranberries we use at Thanksgiving are indigenous to North America.
• It’s hard to believe, but toilet seats are about seven times cleaner than our cellphones.
Now let’s talk about how to avoid a repeat of last year’s marital deduction snafu. Many married couples found that they had to pay additional tax rather than get the refund they expected. If you reduced your benefit contributions this year, you should verify whether you are withholding enough tax from your paycheck. Make certain your withholdings are correct by going to the IRS Estimator at IRS.gov/individuals/tax-withholding-estimator. If your withholdings are low, you should increase your withholdings now, or you will pay a large lump sum and possibly a penalty on April 15th. Be prepared! The 2020 tax returns promise to be complicated, with all the temporary tax law changes created to minimize the economic impact of the coronavirus. Therefore, it is in your best interest to start thinking about your current financial situation and compare that to what you are expecting to happen in 2021. Keep good records and retain your documentation — particularly if you took advantage of the Payroll Protection Program (PPP). Of course, you don’t have to tackle this alone. Tax planning can be trickier than cooking the perfect turkey, so if you have any questions about what tax strategies are best for you or your business, don’t hesitate to reach out to us at DLJ Tax Services. Whether you prefer to call us at (920) 944-6020 or (678) 491-49744 or email me at Deb@DLJTaxServices.com, we’re here to help!
DLJ Wealth Services, LLC is a registered investment advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. Advisory services are provided by DLJ Wealth Services, LLC. DLJ Wealth Services, LLC is a registered investment advisor. Tax advice is provided through DLJ Tax Services, LLC, a separate legal entity, but both companies are owned by Deb Matz. The Good News “Truly, anyone welcoming my messenger is welcoming me. And to welcome me is to welcome the Father who sent me.” —John 13:20—22
* This strategy is not for everyone, so please check with your financial advisor.
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