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Other Articles by Kevin Roberts CPA

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- 11 Traits of The Financially Secure

 

- 5 More Bad Money Habits and How to Overcome Them

 

- 5 Ways We Keep Avoiding Better Money Habits

 

- The Starting Point for Tax Planning

 

- 6 Steps to Estate Planning Done Right

 

- A Billionaire's 4 Keys to Success

 

- Useful Financial Benchmarks for Mid-Life

- Confronting The Lies That Threaten Our Financial Stability

 

- Top 5 Ways to Confront Worries

- Self-Protection Through Knowing How Long To Keep Tax Records
 

- Identity Thieves Want YOUR Tax Return
 

- The Power of Specialized Knowledge
 

- Take A Test Drive Of Your Retirement Plans

 



 

 

 

 

 

11 Traits of the Financially Secure + 4 Ways to Safeguard Your Tax Records + 7 Guidelines for Deducting Business Expenses


 

Part of my early-Monday news scan this week brought me this story: http://cbsn.ws/1Q0chAV.

 

One of the "highlights": almost half of all US households could not come up with $400 to cover an emergency expense. They would need to sell something or borrow cash to do so.

If you find yourself belonging to that category, I'm going to help you today, I think. And if you don't, I urge you to continue to live your financial life in such a way that you remain there. I have some ideas (11 of them, in fact) for you.

In my experience, if you want to get out of a hole, you study the behavior of those who have already made it out. And you do everything you can to copy that behavior.

Yes, some people have been fortunate enough to inherit wealth, etc. But many, MANY more of those who have wealth came about it in a different way.
 

Before I get there, a big tax reminder: 2nd quarter estimated taxes are due on June 15th. Make sure to mail your Federal estimate with voucher #2 (1040-ES) and your check payable to the United States Treasury. Include your social security number and the words "2015 Form 1040-ES" on your check. Mail by June 15, 2015.

If you have state estimated taxes due, the procedure is very similar, except you are perhaps-obviously not paying the "US Treasury", but rather the Department of Revenue for your state of income.



Now, so that YOU do not find yourself in the unfortunate place of not being able to scrape up $400 in an emergency, read this now.

 

"You cannot control what happens to you, but you can control your attitude toward what happens to you, and in that, you will be mastering change rather than allowing it to master you." Brian Tracy


Becoming a household that will be able to ride through instability and uncertainty is only going to become MORE important in future years, not less.

So, that being the case, here is a portrait of those who are able to achieve this status.

You'll notice that these are just as significantly about your mindset as you relate to your finances, as about your behaviors.

Here's what the Financially Secure look like:

1) He always spends less than he earns. In fact, his mantra is that over the long run, you're better off if you strive to be anonymously rich rather than deceptively poor.

2) She knows that patience is truth. The odds are you won't become a millionaire overnight. If you're like her, your security will be accumulated gradually by diligently saving your money over multiple decades.

3) He pays off his credit cards in full every month. He's smart enough to understand that if he can't afford to pay cash for something, then he can't afford it.

4) She realized early on that money does not buy happiness. If you're looking for financial joy, you need to focus on attaining financial freedom.

5) He understands that money is like a toddler; it is incapable of managing itself. After all, you can't expect your money to grow and mature as it should without some form of credible money management.

6) She's a big believer in paying yourself first. It's an essential tenet of personal finance and a great way to build your savings and instill financial discipline.

7) She also knows that the few millionaires that reached that milestone without a plan got there only because of dumb luck. It's not enough to simply "declare" to the universe that you want to be financially free. This is not a "Secret".

8) When it came time to set his savings goals, he wasn't afraid to think big. Financial success demands that you have a vision that is significantly larger than you can currently deliver upon.

9) He realizes that stuff happens, and that's why you're a fool if you don't insure yourself against risk. Remember that the potential for bankruptcy is always just around the corner, and can be triggered from multiple sources: the death of the family's key breadwinner, divorce, or disability that leads to a loss of work.

10) She understands that time is an ally of the young. She was fortunate (and smart) enough to begin saving in her twenties, so she could take maximum advantage of the power of compounding interest on her nest egg.

11) He's not impressed that you drive an over-priced luxury car and live in a McMansion that's two sizes too big for your family of four. Little about external "signals" of wealth actually matter to him.

And a little bonus, if you will: She doesn't pay taxes which could have been avoided with a simple phone call to her tax professional. She plans ahead, before tax time. Give us a call today: (502) 426-0000

 


 

4 Ways to Safeguard Your Tax Records
 

It is tornado season here in the Midwest and hurricane season recently started so the Internal Revenue Service advises individuals and businesses to safeguard their records against natural disasters by taking a few simple steps.

Create an Electronic Additional Set of Records

Taxpayers should keep a duplicate set of records including bank statements, tax returns, identifications and insurance policies in a safe place such as a waterproof container, and away from the original set.

Keeping an additional set of records is easier now that many financial institutions provide statements and documents electronically, and much financial information is available on the Internet. Even if the original records are only provided on paper, these can be scanned into an electronic format. This way, taxpayers can save them to the cloud, download them to a storage device such as an external hard drive or USB flash drive, or burn them to a CD or DVD.

Document Valuables

Another step a taxpayer can take to prepare for a disaster is to photograph or videotape the contents of his or her home, especially items of higher value. The IRS has a disaster loss workbook, Publication 584, which can help taxpayers compile a room-by-room list of belongings.

A photographic record can help an individual prove the fair market value of items for insurance and casualty loss claims. Ideally, photos should be stored with a friend or family member who lives outside the area.

Update Emergency Plans

Emergency plans should be reviewed annually. Personal and business situations change over time as do preparedness needs.

 

When employers hire new employees or when a company or organization changes functions, plans should be updated accordingly and employees should be informed of the changes.

 

Make your plans ahead of time and practice them.

Check on Fiduciary Bonds

Employers who use payroll service providers should ask the provider if it has a fiduciary bond in place. The bond could protect the employer in the event of default by the payroll service provider.

IRS Ready to Help

If disaster strikes, an affected taxpayer can call 1-866-562-5227 to speak with an IRS specialist trained to handle disaster-related issues.
Back copies of previously-filed tax returns and all attachments, including Forms W-2, can be requested by filing Form 4506, Request for Copy of Tax Return.

 

Alternatively, transcripts showing most line items on these returns can be ordered by calling 1-800-908-9946 or by using Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript or Form 4506-T, Request for Transcript of Tax Return.

 

  Last May I hosted a live webinar on Social Security Strategies and Secrets you should understand and use as you contribute and eventually take distributions from this program.  If you are interested in watching the VIDEO REPLAY you can click here.  Kevin
 

 

7 Guidelines for Deducting Business Expenses

 

Business expenses are the cost of carrying on a trade or business.

 

These expenses are usually deductible if the business operates to make a profit.

- What Can I Deduct?
- Cost of Goods Sold
- Capital Expenses
- Personal versus Business Expenses
- Business Use of Your Home
- Business Use of Your Car
- Other Types of Business Expenses

What Can I Deduct?

To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.

It is important to separate business expenses from the following expenses:
- The expenses used to figure the cost of goods sold,
- Capital Expenses, and
- Personal Expenses.

Cost of Goods Sold

If your business manufactures products or purchases them for resale, you generally must value inventory at the beginning and end of each tax year to determine your cost of goods sold. Some of your expenses may be included in figuring the cost of goods sold. The cost of goods sold is deducted from your gross receipts to figure your gross profit for the year. If you include an expense in the cost of goods sold, you cannot deduct it again as a business expense.

The following are types of expenses that go into figuring the cost of goods sold.

- The cost of products or raw materials, including freight
- Storage
- Direct labor costs (including contributions to pensions or annuity plans) for workers who produce the products
- Factory overhead

Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities. Indirect costs include rent, interest, taxes, storage, purchasing, processing, repackaging, handling, and administrative costs.

This rule does not apply to personal property you acquire for resale if your average annual gross receipts (or those of your predecessor) for the preceding 3 tax years are not more than $10 million.

For additional information, refer to the chapter on Cost of Goods Sold, Publication 334, Tax Guide for Small Businesses and the chapter on Inventories, Publication 538, Accounting Periods and Methods.

Capital Expenses

You must capitalize, rather than deduct, some costs. These costs are a part of your investment in your business and are called capital expenses. Capital expenses are considered assets in your business. In general, there are three types of costs you capitalize.

- Business start-up cost (See the note below)
- Business assets
- Improvements

Note: You can elect to deduct or amortize certain business start-up costs. Refer to chapters 7 and 8 of Publication 535, Business Expenses.

Personal versus Business Expenses

Generally, you cannot deduct personal, living, or family expenses. However, if you have an expense for something that is used partly for business and partly for personal purposes, divide the total cost between the business and personal parts. You can deduct the business part.

For example, if you borrow money and use 70% of it for business and the other 30% for a family vacation, you can deduct 70% of the interest as a business expense. The remaining 30% is personal interest and is not deductible. Refer to chapter 4 of Publication 535, Business Expenses, for information on deducting interest and the allocation rules.

Business Use of Your Home

If you use part of your home for business, you may be able to deduct expenses for the business use of your home. These expenses may include mortgage interest, insurance, utilities, repairs, and depreciation. Refer to Home Office Deduction and Publication 587, Business Use of Your Home, for more information.

Business Use of Your Car

If you use your car in your business, you can deduct car expenses. If you use your car for both business and personal purposes, you must divide your expenses based on actual mileage. Refer to Publication 463, Travel, Entertainment, Gift, and Car Expenses. For a list of current and prior year mileage rates see the Standard Mileage Rates.

Other Types of Business Expenses

- Employees' Pay: You can generally deduct the pay you give your employees for the services they perform for your business.
- Retirement Plans: Retirement plans are savings plans that offer you tax advantages to set aside money for your own, and your employees' retirement.
- Rent Expense: Rent is any amount you pay for the use of property you do not own. In general, you can deduct rent as an expense only if the rent is for property you use in your trade or business. If you have or will receive equity in or title to the property, the rent is not deductible.
- Interest: Business interest expense is an amount charged for the use of money you borrowed for business activities.
- Taxes: You can deduct various federal, state, local, and foreign taxes directly attributable to your trade or business as business expenses.
- Insurance: Generally, you can deduct the ordinary and necessary cost of insurance as a business expense, if it is for your trade, business, or profession.

This list is not all inclusive of the types of business expenses that you can deduct. For additional information, refer to Publication 535, Business Expenses.
 

If you have comments or questions on the information in these articles, as usual feel free to call our offices at 502-426-0000.

 


 

 

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Hey its Kevin Roberts and I wanted to ask you a favor.  Weve just installed a toll-free number that I would like for you to call and tell me how you think we are doing as your CPA firm.

 

Just dial 800-609-9006 ext. 9078 and follow the instructions, it only takes 1 minute.  If weve done a good job please let me know.

 

And if we can improve on anything, please mention that too. Thanks!  Kevin

 


 

Remember you can call our offices if you have any questions about these or any other bookkeeping, accounting, tax, financial planning or insurance related issues, at 502-426-0000. 

 

Regards, Kevin Roberts, CPA

President, Roberts CPA Group

 

 

 

 

Kevin Roberts, CPA | Roberts CPA Group | 201b Townepark Circle
Louisville, KY 40243 | 502-426-0000 | Fax: 502-805-0408
La Grange office: 209 S 1st Street | La Grange, KY 40031
502-222-7260 | www.louisville-tax.com