Kounting with KC

KC HallWe are happy to welcome KC Hall, owner of Texas Tornado Services as a bi-monthly columnist!  KC will share tips on finance, accounting and insurance with you. She works with business owners and individuals to help them achieve their financial goals. From insurance to payroll to bookkeeping to taxes, Texas Tornado Services is your choice for getting your financial needs satisfied in the Grand Strand.

For her first column, KC will share ten frequently asked tax questions.

1: Do I need an accountant?

Did you go through a big life change? Get married? Have a baby? Buy a home? Start a business? Exercise stock options? You should seek out professional advice if you can answer yes to at least one of those questions.

2: Should I contribute more to my retirement funds?

YES! If you’re not already maxing out your contributions. Tax considerations aside, the more you can save now, the better off you’ll be in retirement. For 2013, you can put away up to $5,500 ($6,500 if you are 50 or older) into a Traditional or Roth IRA, and you can contribute up to $17,500 ($23,000 if you are 50 or older) pre-tax to your 401k. There are also some limits to how much you can contribute based on other factors, such as your income.

3: Should I convert from a Traditional IRA to a Roth IRA?

The main difference between a Traditional IRA and a Roth IRA is WHEN you pay taxes! Traditional IRAs receive an immediate tax deduction, but is taxed later when the money is deducted. Roth IRAs are taxed on the contributions right away. Many are in favorable tax brackets when they are younger and have the ability to contribute,  thus resulting in lower taxes being paid with the Roth vs. the Traditional. If you convert your Traditional to Roth, you’ll pay income taxes on those funds now. It is best to consult with a financial adviser to determine the best scenario for you.

calculator4: When should I sell any of my investments?

If you’ve held an investment for less than a year and you sell it, you’ll be taxed at a higher rate on any capital gain you made on that investment.

If you have investments that have declined in value since you bought them, you may consider selling. Those losses can be deducted to offset your capital gains and up to $3,000 of ordinary income. If you have no interest in keeping them in your portfolio, you could sell the investments permanently. But if you think that the investments will eventually go up in value, you could sell them, and then buy them back after 31 days (the I.R.S. won’t allow the tax deduction if you do so under the 31-day time frame).

You need to look at your total current tax situation and is best to seek professional advice.

5: Will donating to charity help my financial situation?

You can’t deduct charitable donations if you’re taking the standard deduction in lieu of itemizing your deductions.

If you’re itemizing, and you want to donate items or you want to donate to a charity in a loved one’s name for the holidays, then increasing your giving at the end of the year is something to consider. But keep in mind that a deduction is used to offset the amount of income on which you’re paying taxes. So if you’re in a very low tax bracket this year and may be in a higher tax bracket in the following year, you may want to hold off on donating until the next year.

6: Do I have HSA or FSA money that I still need to use before the end of the year?

A Health Savings Account allows you to drop money into it pretax to pay for medical expenses. You need to have an eligible health care plan to have an HSA, but the good news is that you don’t have to use all of the money, it rolls over indefinitely. Actually, if you have spare money, and you’ve topped out your retirement savings contributions, you could consider putting more in a HSA before the end of the year. It’s like another retirement plan, but for medical expenses.

A Flexible Spending Account (FSA), can be used for medical expenses, day care and other qualified expenses but you could lose any money you have left in there after December 31.

7: Is it a good idea to make moves that either lower or raise my income in the current year?

If you work a salaried, 9-5 job, and expect to stay in that job, no. If you are self employed, there are times when it could make sense to accelerate or defer your income. A tax professional can help you decide when and if the situation warrants.

8: Am I overlooking any deductions?

Have you incurred charity miles or medical miles? Refinanced your home? You may be able to deduct some of the taxes or closing points you paid. Made energy efficient improvements to your home? There may be possible credits that haven’t expired yet.

Started your own business this year? Keep track of everything that you spent and earned. And if you hired an independent contractor to do work for your business, like designing your website, make sure to send them a W-9 form. Any business-related employee compensation and professional fees are deductible.

9: Do my same-sex partner and I need to redo our taxes from last year?

The IRS now treats same-sex couples who were married legally as married for federal tax purposes, even if they live in a state that does not recognize same-sex marriage. Registered domestic partners don’t count. You can also amend your tax returns as far back as the 2010 return that you filed in 2011, if you previously filed separately.

10: Should I gift money to family members?

If you give any single person more than $14,000 a year, without expecting to be paid back, you’ll create more work for yourself and have to file a gift tax return. You won’t be penalized financially, but that generosity will count against the total amount you can give over your lifetime without incurring the gift tax. For 2013, that lifetime total is $5.25 million.

KC Hall, owner of Texas Tornado Services, is a certified tax preparer and a licensed insurance agent with over 15 years experience in the industries. She has 2 local office locations as well as the ability to write insurance in all 50 states. Combined, she has 260 writing agents that all specialize in different areas of accounting and insurance. Check out her website at Texas Tornado Services.

She can be reached locally at 843-900-0205. Outside of the SC area, you can get a FREE insurance quote at 855-345-0526.


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2014-01-16T07:57:22+00:00 January 9th, 2014|