Money Management

The Equifax breach and you: be proactive

Posted on Nov 2, 2017

Earlier this year, hackers were able to breach the security of Equifax, one of the three national credit reporting agencies. More than 143 million Americans – nearly half the entire country – were exposed to the attack, and may have had their personal information stolen (including names and birthdates, and Social Security and driver’s license numbers). Equifax is still determining exactly whose data has been exposed. While you wait to find out, it’s worth taking a few proactive steps to make sure your info isn’t misused by hackers. 1. Start checking. Visit Equifax’s website at www.equifaxsecurity2017.com and enter your last name and last six digits of your Social Security number. The site will tell you whether it’s likely or not your data has been exposed, and put you on a list to get more information. You can also sign up for a year’s worth of free credit monitoring. 2. Watch your statements. Start checking your credit card statements, and pay special attention to cards you don’t use often. The initial reports from the breach were that hackers may have been making charges on underused cards. 3. Check your credit reports. You can look for suspicious items on your reports, such as new accounts being opened in your name, at all three credit report agencies: Equifax, Experian and TransUnion. Free annual reports are available at www.annualcreditreport.com. You may want to stagger your use of the reports to one from each agency every four months. More frequent checks will cost you a small fee. 4. Freeze your credit. If you suspect you may become a victim of identity theft, you can place a credit freeze on your profile at each of the three credit reporting agencies. This stops new accounts from being opened in your name. Note that you’ll have to unfreeze your accounts if you want to apply for new loans or make your credit accessible for things such as job applications. 5. File your taxes early. One of the most common ways identity thieves use your information is to try to claim a tax refund with your data. This was the most common scam in 2016, according to the Better Business Bureau. If you file your tax return as early as possible, you shut down this opportunity for any would-be thieves. Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in McLean and Tysons Corner, VA. Gilliland & Associates is known for our superior knowledge and aggressive interpretation and application of tax laws. We help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+, LinkedIn, Facebook, and...

Read More

HOW TO FIX YOUR OVERFUNDED ACCOUNT

Posted on Oct 26, 2017

Is socking away large sums in a tax-deferred retirement account ever a bad idea? It is when you exceed the annual IRS limits. And intentional or not, the penalties can be painful. Here’s how overfunding occurs and what steps to take to fix the problem. When do overfunding situations occur? Overfunding retirement accounts happens more than you may realize. It can be the result of a job change that causes you to participate in the two different employer retirement plans. Sometimes people forget they made IRA contributions early in the year and do it again later. Others forget that the IRA limit is the total of all accounts, not per account. The rules are complicated. Traditional IRAs can’t be contributed to after age 70½, while Roth IRA contributions are subject to income limits. Plus all contributions are predicated on having earned income. IRAs The annual Roth and Traditional IRA contribution limit is $5,500 ($6,500 if age 50 or older). If you surpass this amount, you pay a 6 percent penalty on the overpayment every year until it’s corrected, plus a potential 10 percent penalty on the investment income attributed to the overfunded amount. The fix: If the overfunding is discovered before the filing deadline (plus extensions), you can withdraw the excess and any income earned on the contribution to avoid the 6 percent penalty. You will potentially owe 10 percent on the earnings of the excess contributions if you’re under age 59½. You can apply the withdrawn contribution to the next year. If your issue is due to age (70½ or older for a Traditional IRA) or income limit (for a Roth IRA), consider recharacterizing your contribution from one IRA type to another. 401(k)s The rules for correcting an overfunded 401(k) are a little more rigid. You have until April 15 to return the funds, period. The nature of the penalty is also different. The excess amount is taxable in the year of the overfunding, plus taxable again when withdrawn. So, you pay tax twice on the same amount. And in certain cases, overfunding a 401(k) could cause it to lose its qualified status. The fix: If you suspect an overpayment situation, contact your employer as soon as possible. Adjust your contribution amount before the end of the year and try to get the problem resolved that way. No matter the cause, if you are in doubt about how to handle excess contributions, give us a call. Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in McLean and Tysons Corner, VA. Gilliland & Associates is known for our superior knowledge and aggressive interpretation and application of tax laws. We help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+, LinkedIn, Facebook, and...

Read More

BUSINESS TAX: TIME TO CONSIDER SECTION 179?

Posted on Oct 25, 2017

Section 179 expensing can be a very powerful tax-planning tool for small- and medium-sized businesses acquiring capital assets. While it doesn’t change the amount of depreciation you can take over the life of capital purchase, it can change the timing by allowing you to deduct your purchase in the first year you place it in service. How does Section 179 work? Generally, when you purchase a piece of equipment for your business — say a $10,000 computer system — you can’t deduct the entire cost in the year it was purchased. It must take the expense by depreciating the cost over several years. Section 179 allows you to deduct the cost of the $10,000 computer in the year it was purchased and placed in service. You can deduct the expense of up to $510,000 of qualified property. The $510,000 deduction begins phasing out dollar for dollar if $2.03 million or more of qualified property is purchased during the year (meaning it phases out completely after you’ve purchased $2.54 million in business capital assets). What is qualified property? Qualified property includes things like tangible personal property, computer software and qualified real property (e.g., interior building costs for nonresidential buildings). Section 179 doesn’t apply to property acquired for use in a rental property if it’s not your trade or business but simply an investment. Some vehicles qualify for Section 179 expensing, within limits. (The limits were brought about when some business owners bought expensive Hummers and expensed the cost in a single year.) If you are considering your options for depreciating your business assets under Section 179, here are important details to remember: Section 179 allows deducting the expense of up to $510,000 of qualified business purchases. A Section 179 deduction cannot create a loss for the business. A Section 179 deduction must be for business use. If an asset is not entirely used for business, the allowance is reduced. If you sell a Section 179 asset prior to the full depreciation period, you will have to record any sales proceeds as taxable income. Many states limit the use of this federal shifting of depreciation. Taking Section 179 for capital purchases can be useful, but it’s not for everyone. Using Section 179 for an immediate tax break means it’ll no longer be available for future years. Consider this as you manage your business’s tax obligation. Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in McLean and Tysons Corner, VA. Gilliland & Associates is known for our superior knowledge and aggressive interpretation and application of tax laws. We help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+, LinkedIn, Facebook, and...

Read More

Stay away from structuring

Posted on Sep 29, 2017

If people manipulate cash transactions to avoid required bank reporting to the Treasury Department, they are using the technique of structuring their transactions. In an effort to identify questionable illegal transactions, financial institutions are required to report any monetary amounts over $10,000 to the Treasury Department. If someone knowingly structures transactions to avoid this reporting, the Bank Secrecy Act allows the IRS to legally seize these assets. The old rules provide fairly broad discretion in this area. Many innocent taxpayers not only had assets frozen, but found it virtually impossible to get their funds returned to them. Here are the most important aspects about structuring that will help you stay out of trouble: Be aware of the rule. As more small businesses try to avoid the high charges associated with credit cards, they must also be aware of the Bank Secrecy Act rules. Establish a good relationship with your banker and have them understand your business to help create a potential ally if needed. Do not knowingly try to avoid the $10,000 reporting rule. Be consistent with your numbers. Create a regular routine of sales deposits. Do not save up deposits and then deposit similar amounts. This could raise red flags. Understand the rules are changing. In a recent change, the IRS will still pursue structuring violations, but will try to more closely align action taken with knowledge of criminal activity. The government must show that the taxpayer knows of the rules and knowingly structures his or her transactions to avoid the reporting. Some people know structuring is illegal but do it anyway. Money laundering is a big problem. Whether for drug money, terrorist fundraising, bootlegging or other illegal activity, excess cash deposits will raise suspicions. So while the IRS uses its tools to catch people acting illegally, it is making an attempt to keep innocent taxpayers out of its net. Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in McLean and Tysons Corner, VA. Gilliland & Associates is known for our superior knowledge and aggressive interpretation and application of tax laws. We help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+, LinkedIn, Facebook, and...

Read More

The rules for withdrawing from a 529 college saving plan

Posted on Aug 29, 2017

Here’s an overview of three types of 529 plan distributions. Qualified withdrawals. When you take money from the account to pay for college education expenses such as tuition, fees, books, supplies, and equipment, the withdrawals are generally tax- and penalty-free, no matter the age of the account beneficiary. Caution: Part of the distribution may be taxable when the account beneficiary receives tax-free assistance such as a scholarship. In addition, you must coordinate 529 withdrawals with the American Opportunity Credit and Lifetime Learning Credit, as well as distributions from Coverdell education savings accounts. These rules prevent the use of the same expenses to obtain multiple tax benefits. Nonqualified withdrawals. The earnings portion of withdrawals that are used for anything other than qualified education expenses are taxable. You’ll also have to pay a 10 percent penalty on the earnings, unless an exception applies. Rollovers. You can deposit or rollover withdrawals into the 529 plan of a family member, or into another account of which you are the beneficiary. When the rollover is completed within 60 days after you take the initial distribution, it’s not taxable. If you have questions or need help calculating 529 plan withdrawals, please call our office. Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in McLean and Tysons Corner, VA. Gilliland & Associates is known for our superior knowledge and aggressive interpretation and application of tax laws. We help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+, LinkedIn, Facebook, and...

Read More

Four tips for building an emergency fund

Posted on Jul 31, 2017

Planning for emergencies is like buying insurance: you pay into an account and hope you’ll never have to use it. But life happens. Cars break down. Roofs leak. Kids get injured. Having money in the bank to cover those unexpected expenses can reduce stress and keep you from relying on credit cards and loans to make ends meet. Here are four easy and effective ways to establish and maintain an emergency fund. Start small. Many financial planners advise setting aside enough money to cover at least six months of expenses. That’s a worthy goal. But for many people it’s also a daunting task, an objective that will take years – not months – to achieve. So set a realistic and achievable amount for your emergency fund, and then get in the habit of contributing regularly. Then don’t touch the account except for real emergencies. Leave it alone and it will grow. Pump it up. When you get a bonus, cost-of-living adjustment, tax refund, or windfall, consider using a portion of that money to bolster your emergency account. Fight the temptation to increase spending with every new dollar that comes along. Make it automatic. With online banking, it’s easy to set up routine transfers from your regular checking account to a separate savings account. If allowed by your employer, allocate a portion of each paycheck to an emergency fund. Consider establishing the account at a financial institution other than your regular bank. As the saying goes, “Out of sight, out of mind.” If the money never shows up in your regular checking account, you’ll be less likely to use it for everyday spending. Sell stuff and slash expenses. Think about selling some of your unused stuff through yard sales, online auctions, or consignment shops. This can generate cash to bolster your emergency fund. Take a hard look at your budget and consider everything fair game: expensive dinners, vacations, cable television, and so on. You may find that a surprising number of dollars can be freed up and stashed away in savings. The key, of course, is to direct those savings – immediately, if possible – away from regular spending and into your emergency account. If you’d like more ideas for setting financial goals or building up an emergency fund, give us a call. Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in McLean and Tysons Corner, VA. Gilliland & Associates is known for our superior knowledge and aggressive interpretation and application of tax laws. We help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+, LinkedIn, Facebook, and...

Read More