When filing a tax return, mistakes such as the common errors listed below can result in a processing delay – and increase the amount of time it takes to receive a tax refund. Using a reputable tax preparer such as a certified public accountant, enrolled agent or another knowledgeable tax professional is usually the best way to avoid this. With this in mind, here are eight of the most common errors taxpayers make when filing their returns:

1. Missing or inaccurate Social Security numbers. Each SSN on a tax return should appear exactly as printed on the Social Security card.

2. Misspelled names. Likewise, a name listed on a tax return should match the name on that person’s Social Security card. This applies to spouses and dependents as well.

3. Incorrect filing status. Some taxpayers choose the wrong filing status. A tax professional can help taxpayers choose the correct status, especially if more than one filing status applies.

4. Math mistakes. Math errors are one of the most common mistakes. They range from simple addition and subtraction to more complex calculations. Using a professional tax preparer ensures an accurate return.

5. Figuring credits or deductions. Taxpayers can make mistakes figuring things like their earned income tax credit, child and dependent care credit, and the standard deduction. Taxpayers should always follow the instructions carefully. For example, a taxpayer who’s 65 or older, or blind, should claim the correct, higher standard deduction if they’re not itemizing. Also, remember to attach any required forms and schedules.

6. Incorrect bank account numbers. Taxpayers who are due a refund should choose direct deposit because it is the fastest way to get their money. They should remember, however, to include the correct routing and account numbers on the tax return. No bank account number means no direct deposit.

7. Unsigned forms. An unsigned tax return isn’t valid under any circumstance. Also, keep in mind that when filing a joint return, in most cases, both spouses must sign. Exceptions may apply, however, for members of the armed forces or other taxpayers who have a valid power of attorney. Taxpayers can avoid this error by filing their return electronically and digitally signing it before sending it to the IRS.

8. Filing with an expired individual tax identification number. If a taxpayer’s ITIN is expired, a tax return should be filed using the expired number. The IRS will process that return and treat it as a return filed on time; however, be aware that the IRS won’t allow any exemptions or credits to a return filed with an expired ITIN. Taxpayers will receive a notice telling the taxpayer to renew their number. Once the taxpayer renews the ITIN, the IRS will process a return normally.

If you haven’t filed your tax return yet, a tax professional can help expedite the process and ensure you file an accurate tax return. If you need help with your tax return, don’t hesitate to call.

A business plan is a valuable tool whether you’re seeking additional financing for an existing business, starting a new company, or analyzing a new market. Think of it as your blueprint for success. Not only will it clarify your business vision and goals, but it will also force you to gain a thorough understanding of how resources (financial and human) will be used to carry out that vision and goals.

Before you begin preparing your business plan, take the time to carefully evaluate your business and personal goals as this may give you valuable insight into your specific goals and what you want to accomplish. Think about the reasons why you need additional financing or want to start a new business. Whatever the reason it is important to determine the “why.”

Next, you need to figure out what type of business or new business direction you are interested in pursuing. Chances are you already have a specific business in mind but if not you might want to think about your business in terms of what technical skills and experience you have, whether you have any marketable hobbies or interests, what competition you might have, how you might market your products or services, and how much time you have to run a successful business (it may take more time than you think).

Finally, if you are starting new business, you’ll need to figure out how you want to get started. Most people choose one of three options: starting a business from scratch, purchasing an existing business, or operating a franchise. Each has pros and cons, and only you can decide which business fits.

Pre-Business Checklist

The final step before developing your plan is developing a pre-business checklist which might include:

• Business legal structure
• Accounting or bookkeeping system
• Insurance coverage
• Equipment or supplies
• Compensation
• Financing (if any)
• Business location
• Business name

Based on your initial answers to the items listed above, your next step is to formulate a focused, well-researched business plan that outlines your business mission and goals, how you intend to achieve your mission and goals, products or services to be provided, and a detailed analysis of your market. Last, but not least, it should include a formal financial plan.

Preparing an Effective Business Plan

Now, let’s take a look at the components of an effective business plan. Keep in mind that this is a general guideline, and any plan you prepare should be adapted to your specific business with the help of a financial professional.

Introduction and Mission Statement

In the introductory section of your business plan, you should make sure you write a detailed description of your business and its goals, as well as ownership. You can also list skills and experience that you or your business partners bring to the business. And finally, include a discussion of what advantages you and your business have over your competition.

Products, Services, and Markets

In this section, you will need to describe the location and size of your business, as well as your products and/or services. You should identify your target market and customer demand for your product or service and develop a marketing plan is. You should also discuss why your product or service is unique and what type of pricing strategy you will be using.

Financial Management

This section is where you should discuss the financial aspects of your business–and where the advice of a financial professional is vital. The following financial aspects of your business should be discussed in detail:

• Source and amount of initial equity capital.
• Monthly operating budget for the first year.
• Expected return on investment (ROI) and a monthly cash flow for the first year.
• Projected income statements and balance sheets for a two-year period.
• A discussion of your break-even point.
• Explanation of your personal balance sheet and method of compensation.
• Who will maintain your accounting records and how they will be kept.
• Provide “what if” statements that address alternative approaches to any problem that may develop.

Business Operations

The Business Operations section generally includes an explanation of how the business will be managed on a day-to-day basis and discusses hiring and personnel procedures (HR), insurance and lease or rent agreements, and any other pertinent issues that could affect your business operations. In this section, you should also specify any equipment necessary to produce your product or services as well as how the product or service will be produced and delivered.

Concluding Statement

The concluding statement should summarize your business goals and objectives and express your commitment to the success of your business.

Help is Just a Phone Call Away

Please contact the office if you have any questions about business plans or need assistance creating one.

Individuals with significant assets who want to transfer wealth to heirs tax-free, as well as minimize estate taxes, should take advantage of proven tax strategies such as gifting and direct payments to educational institutions; however low interest rates and a volatile stock market are creating additional opportunities. Let’s take a look at some of the strategies available:

Gifting

The annual gift tax exclusion provides a simple, effective way of cutting estate taxes and shifting income to heirs. For example, in 2020, you can make annual gifts of up to $15,000 ($30,000 for a married couple) to as many donees as you desire. The $15,000 is excluded from the federal gift tax so that you will not incur gift tax liability. Furthermore, each $15,000 you give away during your lifetime reduces your estate for federal estate tax purposes. Any amounts above this limit, however, will reduce an individual’s federal lifetime exemption and require filing a gift tax return.

Direct Payments

Direct payments for medical or educational purposes indirectly shift income to heirs; however, it only works if the payments are made directly to the qualifying educational institution or medical provider. This strategy allows you to give more than the annual gifting limit of $15,000 per donee. For example, if you’re a grandparent, you can pay tuition directly to your grandchild’s boarding school, college, or university. Room and board, books, supplies, or other nontuition expenses are not covered. Likewise, in the case of direct payments to a hospital or medical provider. Medical expenses reimbursed by insurance are not covered, however.

Loans to Family Members

This strategy works by loaning cash to family members at low interest rates, which is then invested with the goal of reaping significant profits down the road. With mid and long-term applicable federal rates (AFR) rates for June 2020, as low as 0.43 and 1.01 percent, respectively, heirs can lock in these rates for many years – three to nine years (mid-term) and nine to more than 20 years (long-term).

Grantor Retained Annuity Trust (GRAT)

Another relatively low-risk strategy is the grantor retained annuity trust (GRAT), where the donor transfers assets to an irrevocable trust and receives an annuity payment back from the trust each year. This strategy enables heirs to profit from their investments long-term – as long as returns are higher than the IRS interest rate. This is easier than ever now that IRS interest rates are so low. In June 2020, the interest rate used to value certain charitable interests in trusts such as the GRAT is 0.60 percent.

Roth IRA Conversions

Contributions to a traditional IRA are made pre-tax, which means distributions are considered taxable income; however, with a Roth IRA, the tax is paid up front, and distributions are completely exempt from income tax. It is this feature that makes converting a traditional IRA to Roth IRA and rolling it over to an heir an attractive option, especially during a financial crisis. The conversion is treated as a rollover, and typically would be accomplished via a trustee to trustee transfer where the trustee of the traditional IRA is directed to transfer an amount from the traditional IRA to the trustee of the Roth IRA. The account owner pays income tax on the amount rolled over in the year the account is converted, which allows the account to accumulate assets tax-free and future distributions are tax-free.

A Tax Professional is Here to Help

To learn more about these and other tax strategies related to wealth management, please call the office and speak to a tax professional who an assist you.