Faithful Finance

First Half Calendar for 2024

Today we begin with the notion that you have made or are setting some financial goals or resolutions for the new year. To help you plan I have decided to provide a financial calendar road map for the next six months.

January 2024

• Right from the beginning on January 10th, you will note that the first social security checks for the year will be disbursed. These payments will include a cost of living adjustment increase of 3.2% in your income.
• The 15th of January is the last day for your to register for health insurance for 2024 unless you meet certain exceptions such as getting married, having a baby, lost your insurance or experienced some other significant life changing event.
• The 16th of January is noteworthy because it’s the last day for you to pay any 2023 estimated tax payments to the Internal Revenue Service (IRS). Now, paying estimated payments is not required on that date if you somehow can file your 2023 tax returns by January 31, 2024 and pay any associated tax liabilities at that time.
• Finally, January 31, 2024 is important because you should have received your W-2’s of 1099’s for employers and other income providers. It would also be prudent to file as soon as possible to prevent fraudulent persons from filing tax returns on your behalf or in your name.

February 2024:

• February 9th is cutting your cable cord day and you will be well-advised to review your cable costs then as you manage this monthly expense and reduce this expense which seems to increase annually and spiral out of control.
• On or about February 17, the IRS will begin to issue tax refunds if you file early and choose to receive your refunds by direct deposit.

March 2024:

• If you are intending to sell your house or downsize this year, March is the ideal month to list your house. According to Zillow, houses listed in March sell at a faster rate than those listed in other months.
• If you have a healthcare flexible spending account, the grace period may end on March 15, 2024. You may want to look at that account now and plan to expense your account accordingly.

April 2024:

• April 1st, is the deadline to withdraw your Required Minimum Distribution if you turned 73 years old in 2023. Required Minimum Distributions are allowed from your traditional IRA or 401(k).
• April 15 is the deadline for filing both your federal and state tax returns. While this is generally known, what is often the reality is that people do not file extensions and end up incurring penalties and interest for failing to file taxes on time. File an extension irrespective of your financial disposition when April 15, 2024 arrives.

May 2024:

• May 2nd is National Life Insurance day and would be a good time to review your life insurance policy that week. If you are seeking a better policy or looking for one, you should go to AccuQuote.com or PolicyGenius. Com
• If you have filed your tax return on time and expect a refund, you can begin tracking your refund by May 15, 2024 at www.irs.gov/refunds or call (800) 829-1954.

June 2024:

•  June 15, 2024 is the day for you to pay estimated taxes to the IRS based upon how much you owed for tax year 2023. If you did not owe taxes in 2023, then you should have no issue.
• June 30, 2024 will be the final day in which you can file your Free Application for Federal Student Aid) for the 2023-2024 academic year. It could also be the final date on which you might be able to obtain student loans for the academic year.

There you have it! Some of the financial events highlighted which are occurring each month as you plan and get on track financially. Next week we will begin to examine your mindset as you build stewardship in 2024.

THAT’S WHAT’S UP!

Today’s What’s Up is about what’s up and what’s down in 2024. This year expect to see cuts in interest rates for auto loans, credit cards interest and mortgages as the Federal Reserve reduces interest rates. This could be good news if you are house shopping or looking to replace your vehicle. Just wait a few more months and you may be paying less for those items. However in the case of vehicles, gas prices would continue to fall, but vehicle insurance costs will increase in 2024. And that’s what’s up!

Ruthven R. Phillip, Esq., is a tax attorney, Stewardship and Philanthropy Ministry Assistant, and CEO of Give2Getrich, LLC. Give2Get Rich, LLC 2023. All Rights Reserved. Any distribution or reproduction of part or all of the contents in any form is prohibited.

#Money Monday

 While I hate to be the bearer of bad news, you must know that another tax filing season is upon us. Since I know most of you are not enthusiastic about taxes or even filing, perhaps I should commence with the good news.

This year, the deadline for filing your 2022 individual federal income tax return, is April 18, 2023, and not April 15, 2023. With three additional days to file, something tells me that annual procrastinators will still file late. Just remember that the penalty for filing late if you owe is 5% of the tax liability, compounded daily up to 25% plus interest. At a minimum, you should file an extension.

We all should breathe a sigh of relief, knowing that the Internal Revenue Service (IRS) suspended the implementation of having third-party companies and platforms report all of our Cash App, Zelle, Paypal, Venmo and other digital transactions. However, be advised that you may receive IRS Form 1099 next year for your Cash App and other transactions executed in 2023.

How it Works

 The IRS audits a small percentage of tax returns each year. What sets you up for an audit is what the IRS describes as your Discrimination Information Function (DIF) score. Are you still with me, or have I lost you already? Let me translate into English. The DIF score is how the IRS flags tax returns where filers are over-reporting deductions or under-reporting income. Based on your DIF score, you will be audited.

What are some of the most audited areas? Some of these areas are home office deductions, Schedule C filer expenses, job expenses, rental losses, charitable contributions, earned income tax credit, capital gain losses, to name a few.

Tax Rules

This year I decided to share information on tax rules and not specific deductions or credits. Why? Because you might be eligible and should qualify for a deduction or credit. However, because you didn’t follow the rules, you just excluded yourself from taking advantage of an expense, deduction, or credit. An example of this would be charitable contributions.

Charitable Contributions:

Most of you know, or should know, that you are allowed a charitable contribution deduction each year. That’s not the tricky part. The tricky part occurs when taxpayers charitable contributions are reduced, disallowed or denied because of failure to comply with the tax rules or laws.

Here is an example.  If you donate property such as clothing, the receiving organization may not provide you with a value amount to deduct. Therefore, what happens is that most taxpayers assign a number to their contributions, without knowing the applicable rules. The first thing you need to know is that clothing deductions are subject to special contribution rules under Section 170 of the Internal Revenue Code. Sure taxpayers can deduct clothing but only if they are in “good used condition or better”.

Does anybody really know what that means? No! Tax court cases have revealed that you are not allowed to deduct the cost price paid for the article of clothing despite the fact that it was never used or worn, even if the tag is still on the item when donated. A reasonable question to ask yourself is what would that item sell for in the used thrift store? If the fair market value (FMV) amount of clothing exceeds $500 and is not in “good used condition or better” you will need to support your donation, with a qualified appraisal.

Donating a vehicle is another area where special contribution rules apply. If the fair market value (FMV) of the vehicle donated exceeds $500, your charitable contribution deduction may depend on additional factors. The first is, if the donated vehicle is sold without the donee charitable organization providing a significant intervening use of the vehicle or did not make any material improvements to the vehicle; then your deduction is limited to the gross amount from the sale of the vehicle. While I could see a taxpayer saying, I just changed the oil, bought a new battery or changed the tires on the vehicle all of which should increase the value of the donated vehicle’s deduction; in the end, the sale price may control your deductible amount. If the value of the donated vehicle increased since it was purchased, then you will also have to calculate the basis or cost of the vehicle and any related depreciation, in order to figure out the amount of your charitable contribution.

Final point on charitable contributions for now is that you need to ensure that the receipts you received from the donee organization are contemporaneous. This term means you should have the receipts or records prior to filing or at the time you filed your tax return.

One short story. One client of mine had claimed a charitable deduction based upon their church receipts. They were audited and because they could not produce all the receipts at the time, the IRS denied their deduction. During the audit I discovered that some of the receipts were missing and requested them from the church treasurer. The IRS pushed back saying because the missing receipts were not contemporaneous, the deduction was going to be denied. What!

Needless to say, while that was technically true, it was ridiculous! My client had canceled checks, bank statements and other supporting documentation; but because some of the receipts were missing at the time of the initial audit and when the returns were filed, their contributions were being denied. At the end of the day we won and my client avoided paying any taxes.

Schedule C

 While you are running your side hustle, you may be filing IRS Form Schedule C on which you are claiming expenses. The first thing I would say is that you do not need to produce or have every receipt related to your expenses in order to justify the expenses. Why? This is because of what we call the Cohan Rule. This rule says that if a taxpayer can reasonably estimate his or her expenses, using other methods of support without the actual receipt, the deduction should be allowed.

You see, Mr. Cohan ran a business and was audited by the IRS. On his return he listed expenses but could not produce any receipts and therefore the IRS denied all his expenses and taxed him heavily. The tax court ruled against the IRS and required them to allow some expenses based upon estimates and other factors.

Today, the IRS has punched back since Cohan and has created new rules, while allowing Cohan to remain in place. The IRS narrowed the list of expenses for which no documentation is required. For example, the rules in effect today require you to produce telephone receipts if you want to claim that as a deduction on your taxes. Failure to produce telephone receipts will result in denial of those expenses. Telephone receipts are mandatory.

In the end, taxes and tax matters are not one of our favorite or most enjoyable duties as citizens. Each year there are rule changes, higher rates and what seems to be lower refund amounts. But as the saying goes, the only certain things in life are death and taxes!

WHAT’S UP!

Today’s what’s up is about tax deadlines. If you have a S-Corporation or a Partnership or LLC taxed as a partnership, your filing deadline is March 15, 2023. You can file for a six month extension if you cannot meet this deadline. If you have a business corporation, the filing deadline is April 18, 2023. Individual taxpayer filing deadlines is April 18, 2023. If you file an extension, your deadline is October 16, 2023. And that’s what’s up!

Ruthven R. Phillip, Esq., is a tax attorney, Stewardship and Philanthropy Ministry Assistant, and CEO of Give2Getrich, LLC . Give2Get Rich, LLC 2023. All Rights

Reserved. Any distribution or reproduction of part or all of the contents in any form is prohibited.

#MoneyMonday #Operationhiddentreasure #IRS #Canthide

In an estimated three weeks from now or more specifically October 15, 2022 it will be the deadline for those who have not filed their 2021 tax return or have filed an April 15, 2021 tax exten-sion to file their return. For those who have already filed their return on time, you may think this Money Monday may not contain any information for you, but I suggest you keep reading. While we know that the Internal Revenue Service (IRS) may retain information about an individual, in the age of digital and cryptocurrency what you can hide is impossible.

Hidden Treasure:

In the year 2021, the IRS launched “Operation Hidden Treasure.” As the name suggests, the agency is seeking information taxpayers have not reported on their tax returns. In this case, they are specifically looking for unreported digital or cryptocurrency transactions information. Reportedly, this operation is a joint partnership between the civil division and the criminal division of the IRS.

The Letters:

There are three letters you do not want to receive from the IRS with regards to this operation. They are letters numbered 6173, 6174 or 6174-A. Interestingly enough, the letters contain a heading section – “Why We’re Writing You.”

Below that heading, is this following paragraph: “ We have information that you have or had one or more accounts containing virtual currency, and my not have met your U.S. tax filing and reporting requirements for transactions involving virtual currency, which include crypto and non crypto virtual currencies.” How would you like to receive one of those letters? I won’t tell you the rest of what they letters contain, but I’m sure you can guess, it’s not good news.

Letter 6173:

If you received a letter numbered 6173 from the IRS, it’s pretty much guaranteed that you are in serious trouble with the them, and the best thing you can do for yourself is seek professional help. This would not be the time for a do it yourself project. Here’s why:

By the time this letter is issued, the IRS knows you have crypto currency and or have engaged in virtual currency transactions. Secondly, you have not reported virtual currency information on your tax return. You should know by now, that the IRS, has required taxpayers to answer digital currency questions, and these questions appear conspicuously on the first page of IRS Form 1040. This was done intentionally, as part of Operation Hidden Treasure.

The final point I would share about letter 6173 is that it should not be ignored. As you prepare to file your 2021 tax returns for late filers or even it you have filed on time, but omitted your virtual currency transactions, take steps to correct them before your circumstances change.

That’s What’s UP!

Let’s talk about student financial aid assistance. The Application for Federal Student Aid for the 2023–24 school year should be available on October 1st, 2022 . While you have until June 30, 2024 to submit your application for student aid, states and schools award money on a first-come, first-served basis or impose deadlines earlier than the federal one. Prepare to apply on October 1st. And that’s what’s up!

. Before you  walk away from your job, evaluate these considerations.

#MoneyMonday #GreatResignation #Takethisjob

The great resignation, or the “quit rate” came alive at the beginning of the pandemic. And, the quit rate shows no sign of slowing down. According to the Bureau of Labor Statistics, last November 4.5 million employees voluntarily quit their jobs. Another 4.5 million quit their jobs in March of this year. Another 4.4 million did the same thing in April of 2022. According to the Pew Research Center, there are three major reasons for the exodus:

1. Low pay (63%)
2. No opportunities for advancement (63%)
3. Feeling disrespected (57%)

But with all these resignations comes the critical financial decision, and that is, what to do with your retirement plan or 401(K) from the job you are leaving or planning to quit?

How Best to Take Your Money with You

There is no rocket science here. Your choices are to leave your plan with your old or former employer, transfer or roll it over to your new employer, or transfer your retirement into a new IRA. But before I share option considerations, unfortunately, I have to mention our favorite uncle–Sam!

Option 1:  Keep the Money Parked 

As a general rule, according to the Internal Revenue Service ( aka uncle Sammy), you only have 60 days from the time you receive your 401(K) distribution to roll it over or transfer it before facing penalties and interest consequences. If you are going to leave the money with your old or former employer, the 60 day rule does not apply. However, here’s a problem. If your retirement plan has an account balance below $5,000, your former employer has the option to cash out your plan! If they do cash out your plan, you will now have to face Sammy, paying a minimum of 10 to 20 percent in interest, tax and penalties if you are younger than 59.5 years old. Did I mention that Sammy is about to hire some 80, 000 new employees and upgrade the system?

Option 2: Roll the Plan Over to New Employer

One major benefit of rolling over your retirement plan to your new employer that is allowed is that you can borrow against your retirement plan with the new employer. If you leave your 401K with your former employer, you will not be able to borrow against that account. Is that an option you are comfortable with? Another consideration in transferring your account would be because of lower management fees and possibly better, and low cost investment options at your new employer.

Perhaps the most important point about rolling over to your new employer’s plan is to ensure that you do not exceed the annual contribution amount. For example, if you have already contributed $15, 000 this year to your former plan before leaving your former employer, you can only contribute $5,500 to the transferred or rolled over plan for this year. The point here is that just because you rolled over to a new plan, it does not mean you can contribute the maximum allowed in 2022 of $20,500.00 to the new plan.

Option 3: Roll the Plan Over to IRA

Rolling your retirement into an IRA if you are not accepted into your new employer’s account can have some benefits. The advantage with choosing this option is that you can build your own investment portfolio or strategy that is more customized to you. In rolling over to your new employer’s plan you may not be able to customize your investment plan or strategy. This is just another option if you decide to participate in the great resignation and end the relationship.

Perspective: One viewpoint from the great resignation is not simply that people were under-paid and over worked or that their lives lacked balance between work and family. Substantively, it suggests to me that people were not living in their purpose. They were working jobs just to collect a paycheck, but were not satisfied and did not find meaning in their life. If you are considering resignation, don’t just focus on the economics, but spend time aligning with your purpose!

WHAT’S UP!

Today’s what’s up is about Labor Day Sales. The holiday will soon to be here and you should pay attention to what deals may exist. Besides summer clothing, you may find discounts on large appliances . Therefore, if you are seeking appliances, it might be a good time to make that purchase. It may be also a good time to find discounts on mattresses. And that’s what’s up!

Cashflow and Cash App, tax implications for your convenience #MoneyMondays

Just Cash App me is a common statement or expression of instruction made between friends,  family members and business individuals when they want to send or receive money in today’s economy. But this Cash App, Zelle, and PayPal thing now has me apprehensive and cautious, ever since our fiends over at the Internal Revenue Service ( IRS) have gotten their claws into these transactions. With most of the year 2022 behind us, I believe there is still time for some to course correct when it comes to these transactions and reduce or eliminate any surprises next year.

What’s new in 2022

Starting January of this year, the IRS is requiring all of these digital transaction platforms, to provide individuals and business with an IRS Form called 1099-K for all account holders,  whose account shows that at the end of 2022, they have received in excess $600.00 dollars. I am not going to get into the weeds of this change or new law,  but will simply clarify some elements about the change.

First, it is not that you have received $600.00 or more from someone all at once which can make it reportable. It is the fact that from January through December of 2022, you may have received cumulatively,  $600.00 or more, not related to personal activities but may be business related for goods or services provided.

Secondly, general tax law rule or for those of you interested in code sections, you need not consider any section more than section 61 which defines gross income. It literally defines gross income as money from any source. If you are unsure what the IRS means when they say from any source, look up United State v. Capone, as in Al Capone. The IRS defined gross income to include money earned from illegal or drug activity. But since they are equal opportunity appliers of the law,  expenses incurred in carrying on drug or illegal activities are also deductible. They sure added a new definition to the commandment, “ thou shall not steal”. Did I say it defines gross income?  Well, it also does defines gross income, by defining what gross income is not. Now that you have that all figured out, why does this matter?

Why Does it Matter:

Let’s start with the fact that this is a new law being implemented for the first time this year and nobody knows exactly how all this will play out. While this is a reporting change the impact is significant. Third party platforms are responsible for making determinations when it comes to issuing IRS Form 1099-K. Here is an example of one issue. If the third party platform is unable to distinguish the nature of the transaction between a personal transfer and a business transfer, they will most likely issue you IRS Form 1099-K.  Therefore, if you do not have a side hustle or are getting reimbursed for some product or service, you might find yourself mistakenly receiving a 1099-K.

Another potential consequence would be where a person is an independent contractor being paid through Cash App. In that case,  they will receive a 1099-K from the third party platform. However, the party who hired them is required to issue them IRS Form 1099 also in order to claim these expenses on their taxes. Potentially, one person could receive two IRS Forms 1099’s for the same service. And guess what? You the

Cash App recipient, will have to explain to the IRS, why or why it should not be included on your tax return. But this example could be extrapolated to include, roommates splitting up the rent payment or selling items on eBay for less than you paid for it.

The take away here is not that you should not use these platforms, but that for the remainder of this year pay attention to your digital receipts in this space. While convenient and easy, it could turn out to be a headache. Transactions which should be excluded may be included especially since the implementation is new, and all the pieces have not been quite figured out. As you know, the IRS always make mistakes in their favor!

WHAT’S UP! Today’s what’s up is about three reasons why cash offers in purchasing a home or property is attractive. The contingency of getting the buyer approved is removed. In other words, there is no 45-60 days waiting period . Secondly, removing the approval contingency means that you can get to closing in two weeks. Third, lenders require appraisals prior to approving the loan. With a cash deal, appraisals may not be required. Therefore, if you can offer a cash deal, you can move to the head of the line. And that’s what’s up!

Ruthven R. Phillip, Esq., is a tax attorney, Stewardship and Philanthropy Ministry Assistant, and CEO of Give2Getrich, LLC . Give2Get Rich, LLC 2022. All Rights Reserved. Any distribution or reproduction of part or all of the contents in any form is prohibited.