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Topics: Tax Planning Advice

April 26, 2021

Protect yourself from these tax-related scams.

Tax-related scams have become increasingly common, and they happen year-round.  Fraudsters will contact you pretending to be from the Internal Revenue Service (IRS), a tax accounting service, or another tax-related agency.  You could receive fake emails, phone calls, letters, or other communications.

Be on high alert for phishing emails. Scammers are attempting to steal information such as tax IDs, account information, passwords, and other valuable data.  Be immediately suspicious of any unsolicited communication (email, text message, letter, or call) that asks you for your Social Security number, login credentials, or other personal information.

Review these helpful FAQs:

  • Will the IRS contact me via email?

The IRS will never initiate contact with you via email, text messages, or social media with a request for personal or financial data. Be extremely careful with any unsolicited email that claims to be from the IRS.

  • What should I do if I receive an email or text message claiming to be from the IRS or another tax service that asked for sensitive information?

Do not reply! Do not click on any links or download any attachments. Forward any IRS-related emails to

  • What should I do if I discover a website claiming to be the IRS that I suspect is not legitimate?

Do not click on any links, download any files, or submit any information. Send the URL to

  • Are there any trusted resources I can use to identify email scams or websites claiming to be
    the IRS?

The IRS highlights examples of email scams and bogus websites. Find the information online at and

  • What should I do if I receive an unsolicited phone call or letter claiming to be from the IRS that
    I suspect may not be legitimate?

Contact the IRS yourself to confirm any requests made via phone or letter, particularly those that are threatening or demand immediate payment. Visit for phone numbers and other tips.

  • If I receive a suspicious tax-related email while at work, should I notify my company?

Yes! Report suspicious emails to IT. The IT team can help you determine if a message is legitimate. In addition to confirming requests for your personal data, you should verify any email that asked you to provide copies of W2 forms or your coworkers’ tax-related information.

January 21, 2021
Don't get caught up in the here and now. Short-term moves and market timing are not sound financial strategies for your serious long-term plan of pursuing financial independence.  Good planning does, however, require intermediary decision-making. A few things to consider before year-end:

  1. Charitable Giving – To receive 2020 tax benefits, donations must be made by year-end. Be sure to keep a record of all giving for future tax purposes. Other planning strategies to consider are gifting highly appreciated stocks and bunching charitable donations in the same year.
  2. Tax Harvesting – Look for opportunities to sell stocks that have dropped in value to offset potential capital gains liabilities.

As always, we are available to help you with these year-end decisions and keep you focused on your long-term financial plans. Thank you for entrusting us with your financial life. Let’s all remember to be grateful and enjoy this holiday season.

April 17, 2019

Now, I’ve mentioned before that I’m not a fan of large tax refunds (see March 1 blog). In fact, if you are consistently getting a large tax refund, you should probably adjust your withholdings so you can dedicate that money to your financial why’s every paycheck. After all, allowing the IRS to hold your money is a bad investment. If you should find yourself receiving one, though, you may be wondering how best ways to use it. It’s only normal to be tempted to do some retail therapy or splurge on a fun experience. However, it’s best to see how you can get your money to work for you before giving in to that temptation.

The very first thing to consider is how much debt you have. Large amounts of debt, whether it be student loans, credit cards or other outstanding financial obligations, can cripple you from saving for your goals. Using your tax refund to pay down debt might be the very thing to get you closer to saving for your goals.

You also want to make sure to bulk up your emergency fund. An unplanned repair, medical expense or job termination can all cost a pretty penny. Without an emergency fund, we may feel tempted to use our credit cards to cover the unexpected expense. As I just mentioned earlier, this simply takes us farther from our goals. Ensuring that we have an adequate emergency fund can make sure that we stay on target regardless of what life may throw at us.

Your tax refund can also be used to work towards your financial independence. Maximize your contributions. If you don’t have a plan, establish one. A little money can go a long way with the help of time and compound interest. Remember: there is no do-over when it comes to saving for retirement, so be sure to do as much as you can now because that time will be here before you know it.

I understand that using your tax refund check to indulge in something today can be quite tempting. More often than not, though, these distractions simply take you off your path to financial independence. You need to make sure that you’re making the money you receive today work to build the life you want to live tomorrow.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

March 7, 2019

A tax refund isn’t winning the lottery. It isn’t a gift. It’s the return of your money, money that you’ve earned that the government has been holding. At a time when you need your money to be working for you, you can’t afford to have your money do nothing, not even earn interest. Rather, your money needs to be working towards your financial freedom.

The issue with a large tax refund is that the money that has been withheld throughout the year could have been working for you all along. Rather than have it deducted, you could have been paying down debt, contributing to your emergency fund or investing it for your future. Yes, you can definitely do those same things with your tax refund. However, now you’ve missed out on the time your money was being held where it could have been earning interest or saving you money by paying off debt sooner.

While I am a firm believer in minimizing your withholdings throughout the year, I know that this shines a light on an individual’s sense of discipline. You need to make sure that you’re applying the additional funds where they need to go, which is not the retail fund or other expenses that aren’t working towards your future. Automatic transfers for both savings and investment accounts make it convenient to get your money to work for you. Another consequence of having a minimal amount withheld throughout the year is that you could owe the government come tax season. Once again, this supports the need for saving and being disciplined with your money.

You’ve put in a lot of hard work for your money. Not only should it be a means to your financial independence, it should be a tool that you can access right away. Take advantage of your money today to ensure that you get where you want to go tomorrow.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

June 11, 2018

Paying taxes is inevitable. The key to being as efficient as possible about how much one pays in taxes requires careful consideration of the big picture. And while many people simply want to know if they can have a tax-free retirement, it really starts with being clear about how and when taxes get paid…and to defining what a “tax-free retirement” actually means. For example, if someone is striving to have income during retirement that is tax-free AT THAT TIME, then there are a plethora of investment and insurance products out there that could help defer taxes on earnings, and potentially, have tax-free withdrawal benefits for some types of accounts. But that doesn’t mean retirement is “tax-free”.

Let’s clarify what a few of the most common types of taxes are:

Income Tax – taxation on earned income can occur on many levels; local, state and federal. The amount a person would have to pay varies greatly on their situation. And, there are various types of tax credits that could affect the amount of taxes that would be paid on income. Any earned income that is deferred into a qualified retirement account generally means that taxes on that income won’t get paid at the time it is earned, but when that income is taken at a later date, during retirement, taxes are paid at that time. The idea that paying taxes on income later, when one might be in a lower income tax bracket, might prove more beneficial. But a) there is no guarantee what the tax rates will be in the future, and b) there may be several other factors with a person’s overall taxation that could affect what is perceived as a benefit. A tax professional is the best person to help folks evaluate what kinds of strategies are best for their overall situation. At the end of the day, SOME form of income tax will be paid, either when it is received upon earning, or when it is withdrawn from a qualified plan “down the road” in retirement.

What can be done to possibly reduce these taxes? Speak to a tax professional about what tax credits might apply, and also review with them if itemized deductions can play a role in reducing taxation.

Sales Tax – taxation occurs on state levels for various goods and services that get purchased. The percentage of taxation is usually based on the price of said goods and/or services. But that percentage charged can vary greatly from state to state, or even within different municipalities. There are a few states that don’t have any sales tax on most goods and services.

Excise Tax – taxation that is applied to specific types of goods; gas, cigarettes, beer, liquor, etc. These are typically nicknamed as “sin products”. Taxes received for these particular products are generally used to help raise money for bringing awareness to the potential dangers of these products.

What can be done to manage sales and excise tax? Not much. These types of taxes are very hard to “manage”. Changes in lifestyle; consumption of goods that fall within this category, will obviously affect the amount of sales taxes paid.

Property Tax – taxation that is applied to property owned. Taxes received tend to go towards local municipality needs. The amount of property taxes charged is usually based on a percentage of the value of the property.

What can be done to manage or alleviate property tax? Renting instead of owning might prove beneficial with alleviating property tax. However, there may be tax benefits also lost by being a renter instead of an owner. Again, a tax professional is best for helping to calculate what the tax benefits are for both scenarios.

It might not be possible to have a completely tax-free retirement, but by working with a financial professional and a tax professional, the ability to strategize investments and manage how taxation occurs could prove very beneficial. It’s not just about saving and investing…it’s about being as savvy as possible with the decisions along the way.

May 24, 2018

When planning for retirement, you need to look at multiple sources of income and be sure that some of the income sources are tax-free. The more, the better. So, how do you plan for a retirement income stream that minimizes overall taxation?

Four Instruments that Provide tax-free Retirement Income

Here are four great ways to provide yourself with tax-free.

  1. Roth IRA is a great retirement investment that can result in a steady stream of tax-free retirement income as long as they are considered qualified. However, you must qualify for an IRA and the requirements are adjusted year by year as is the amount eligible for savings. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.

If you do qualify, money put into a Roth IRA is taxed when you receive it, so it is not taxed again when it is withdrawn. In 2018, the eligibility requirements are:

  1. Single or head of household, earning less than $120,000 to fully contribute to a Roth IRA.
  2. Married filing jointly or a qualified widow(er) earning less than $189,000 to fully contribute to a Roth IRA.
  3. Married filing separately earning less than $10,000 to fully contribute to a Roth IRA. (Note that those married but filing separately can use the limits for single people as long as they have not lived with their spouse in the past year)
  4. Municipal Bonds and Funds provide income distributions not taxable by the federal government though they are may be subject to state income tax. Because they are not subject to federal income tax, interest paid on these bonds is typically less than taxable bonds.

There is no income limit to investing in tax-free municipal bonds and funds.

  1. Health Savings Accounts (HSAs) are available if your employer offers health insurance using an HSA. Combined contributions by the employer and employee to this account as of 2018 can be as high as $6,900.00 for qualifying plans.

Following the rules about which expenses are reimbursable, no taxes are paid on withdrawals.

In addition, the HSA funds and earnings can be held until retirement then uses to provide tax-free income by reimbursing the holder for past and current allowable expenses which include Medicare premiums.

  1. Roth 401(k) or 403(b) allow Roth contributions inside these accounts making those contributions and their subsequent retirement earnings, tax-free. These accounts are not subject to income eligibility limits but they are subject to taxes in the year that contributions are made.

Making the Most of Your Home

Another way to make a smart investment for your retirement is to pay off any mortgage that you have on your home before you retire which allows you to live in your home for the cost of property taxes and home insurance alone.

For many retirees, this is a huge reduction in their monthly expenses allowing the money be used elsewhere.

May 21, 2018

Your first thought, spend it! But how? Is it the house project you and your spouse have been discussing for the last several months? Should you pay down your credit card balance? Go on a trip? Wait, you’re excited about the refund, but in retrospect you should have adjusted your allowances so that you didn’t give the government an interest free loan over the course of the last twelve months. With that said, should you fire your accountant? Well, it’s too late now. Take a moment, and think through the best use of this money? What are your short-term priorities? How do those priorities align or even conflict with other priorities that are further down the road? Should the refund have just one focus?

Let’s first sort through what we need to consider. Is this refund enough to actually complete the house project or will you actually have to put the remaining balance of the project on a credit card? Do you have your three to six months of savings in your emergency fund? What are the interest rates of your current credit cards? What is the current state of the market? Are you comfortable with market risk if you were to invest your refund? How secure is your current career? How variable is your current income? These are significant questions and require more diligence than, quickly hiring the contractor to install heated floors in that master bathroom. Give some intentional thought to this prior to your refund arriving in your bank account. Meet with a Certified Financial Planner to not only consult about what to do with your tax refund, but also your current planning situation and existing investment accounts and risk management plan.

Prior to the receipt of your tax refund, create a pie chart, sort through your most important priorities and time frames, then allocate accordingly, without heavily weighting one priority over the next. Make your refund go further. Start with savings, then, make a larger credit card payment than the monthly minimum if a balance exists, assuming the interest is in the teens. Tuck a portion into the stock market. If you anticipate needing or wanting the money prior to retirement, establish or contribute a portion of the refund to a non-retirement investment account. Only after taking these steps should you allocate funds to a home project. Why? You have now considered long-term planning first, then addressed short term priorities. Life happens, homes need upgrades, and travel is always an option. These plans will ALWAYS be available and present. Retirement and long-term planning will not happen, if you don’t plan now. Meet with a Certified Financial Planner to sort through what to do with your tax refund. Finally, discuss this with your CPA in preparation for next year’s taxes to sort through how you can limit the refund and have more cash available over the course of the year.

February 1, 2018

If you're one of the millions of Americans who received, or are expecting to receive, a tax refund, you are probably trying to decide how to spend it. The average refund this year is around $3,000, a nice chunk of change to throw at one of your goals. Rather than impulse buying that new Apple iWatch or splurging at Sephora, make the best use of this windfall by putting it towards improving your financial situation.

Build Up An Emergency Fund

Some very good friends of mine woke up recently to find that their downstairs had flooded from a burst pipe on the second level. They had to rip up their hard wood floors, replace furniture, and even replace some of the walls. Luckily, their bedroom and their child's nursery was spared, but THIS type of unexpected event is exactly why you need an emergency fund. If they didn't have cash readily available in a savings account, they might have been tempted to put charges for repairs and replacements on a high-interest credit card. Depending on your situation, you should ideally have 3-6 months of regular expenses in the bank. Use your tax refund to start, or top off, your rainy day fund.

Pay Off Debt

The power of compounding interest can work in your favor when investing, but it can also cause debt to grow faster than you might think. Credit card companies apply their interest fees to the amount that you owe initially. But every month (and sometimes every DAY!) after that, the compounding interest will apply to the principal, as well as the previous month's interest. If you want to apply the snowball method, apply your refund to the smallest account you can close out. Alternatively, you can use the “Avalanche” method, and put your refund towards the card with the highest interest rate. Paying off the smallest account might feel good, but if you have double digit interest accruing on a card, get that debt paid off as fast as you can. Take the windfall from your refund and put it towards cleaning up your personal balance sheet.

Fund an Individual Retirement Account

IRAs are one of the greatest savings vehicles you can have for retirement. These vehicles allow you to invest in the market outside of any employer-sponsored plans (like a 401K) with tax-free growth (no capital gains!) until retirement. There are two types of IRAs that are available to the general public: Roth IRAs and Traditional IRAs. With a Roth, you contribute post-tax dollars and don't have to pay income taxes on any distributions in retirement. There is, however, a phase-out limit based on income. With a traditional IRA, you do pay income taxes on distributions in retirement. However, contributions made could be tax-deductible for that tax year (contributions made from January 1st of the current year through April 15th of the following year). As of now, individuals can contribute up to $5,500 per year ($6,500 if you’re age 50 or older), or your taxable compensation for the year, if your compensation was less than this dollar limit.

Monetize Other Financial Goals

Planning to take a big family vacation to Disneyland in 5 years? Dreaming of owning a house but need to build up a sizable down payment? Wondering how you are going to pay for your pre-teen's college tuition? If you have any intermediate goals (prior to retirement), consider opening a brokerage account to help your money grow more efficiently. Statistically, the stock market has more up years than down, and historically, has recovered from those down years relatively quickly. If you have time on you side, consider monetizing these goals by participating in the market at a level that is in line with your risk tolerance.

But If You Must, Splurge…A Little

If you just can't help it, take a small percentage of your refund to treat yourself. Whether it's a nice dinner, a manicure, or checking out a movie with your spouse, take a minute to blow off some steam. Keep this amount small though as the path to wealth is paved with good decisions. Start making good habits today to delay gratification and secure a financial safety net in your future.

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